Gold reverses early losses to gain over 2%

London: Gold rose by more than two per cent on Friday, reversing early losses as the dollar pared gains against the euro.

Bullion had been down in morning trade in London yesterday, as the dollar's rally to an 11-month high against the euro reduced gold's appeal as an alternative to the US currency.

However, as the dollar gave back gains to the euro in the wake of worse than expected employment figures in the US, gold leapt higher to a hit a peak of $819.30 an ounce.

Gold eased on profit-taking to $806.00/$807.00 an ounce at 1444 GMT from $796.15/$797.75 late in New York on Thursday. "This looks like the last battle of the longs to get prices to rally," said Commerzbank spot-trader Michael Kempinkski.

"A few shorts got caught on the wrong side when prices went back through $800, so they've had to cover going into the weekend. With the way the dollar has recovered lately, gold should really be down around $750 an ounce by now."

Gold has fallen from close to $980 an ounce during the same period, with many analysts saying the dollar's strength or weakness remains the number one factor in determining the direction for gold.

"The dollar has benefitted from investors fleeing risk outside of the United States, unwinding positions and moving money back into dollars," said Lehman Brother's analyst Michael Widmer.

"Rising risk aversion would generally be bullish for gold, but the dollar seems to have been the main driver for so many commodities lately."

Other analysts said that while the risks of a global slowdown were dominating sentiment on equity markets yesterday, the fear of systemic financial crisis was not as great as it once was.

Safe-haven flows into gold emerged after the collapse of Bear Stearns back in March, shooting the metal to its all-time high of $1,030.80 an ounce.

Increased physical buying by jewellers in India and the Middle East at lower price levels is supportive for the metal, with demand thwarted earlier in the year due to gold's record breaking advance.

However, traders said most physical buy orders would not emerge until prices challenged 11-month lows around $770 an ounce.

Platinum dropped as concerns over demand for autocatalysts, due to news of poor car sales in the US, prompted investment funds to sell.