Gold up with eye on Greece; silver rallies 3.8%

SAN FRANCISCO (MarketWatch) � Gold futures gained almost $10 an ounce by the close Friday, rebounding from earlier losses with the dollar losing ground as traders awaited the outcome of talks between Greece and its bondholders.

Investors also digested news that U.S. existing home sales climbed in December but came in short of expectations.

�Short term, a stronger euro and a weaker dollar are bullish for gold,� said Brien Lundin, editor of Gold Newsletter. �Longer term, however, a weakening euro due to monetary easing will help drive gold higher.�

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Gold futures for February delivery �rose $9.50, or 0.6%, to settle at $1,664 an ounce on the Comex division of the New York Mercantile Exchange after tapping a low of $1,645.20 during the session. Prices added 2% for the week.

Silver stood out in Friday�s trading, leading the gains on a percentage basis among major metals. Platinum climbed as well, but prices for copper eased after gains in the past three sessions.

For now, �gold continues to benefit from the �risk-on� theme of recent trading sessions,� said Lundin.

�The lack of bad news from Europe, and the potential for some positive developments on that front, have emboldened investors to rebuild positions in gold,� he said. �Basically, it�s becoming apparent that, unless Europe�s financial house of cards collapses beforehand, the only way to keep it intact will be to print much more money. And this will be very good for gold.�

Taking cues from the greenback

Gold traders also took cues Friday from trading in the dollar.

The dollar index DXY , which measures the U.S. unit against a basket of six other currencies, traded at 80.185, little changed from 80.198 late Thursday after having tapped a high of 80.438 earlier.

/quotes/zigman/1652083 DXY 82.55, -0.25, -0.30%

�It�s all about the speculation that a Greece debt deal pushes the euro much higher and [the dollar] relatively much lower, thus you can smell the speculation all over the planet in a relatively stronger yen and the metals,� said Richard Hastings, a macro strategist at Global Hunter Securities.

Greek officials have been meeting with the Institute for International Finance, which is leading negotiations on behalf of private creditors over the nation�s sovereign debt. Read about Europe Markets.

�Gold in U.S. dollars has an inverse relationship to the euro-yen pair, so when the euro-yen starts moving in one direction for more than an hour, then gold in dollars will probably move in the opposite direction,� said Hastings. At last check, the euro EURJPY �bought 99.47 Japanese yen, down 0.5% from Thursday.

The dollar had firmed against the euro earlier Friday after the shared currency failed to retake the $1.30 mark. Read about Friday�s action in currencies.

�Gold is keying off of the dollar and technicals more than anything else,� said Tom Essaye, editor of the 7:00�s Report, a daily commentary on equity and commodity markets and the economy.

�Gold is also running right into a downtrend line that has been in place since November, so I think the next few days in gold could be pretty interesting, and give us clues as to whether or not this four-month-long correction is ending,� he said.

For now, Essaye said he�d be surprised to see gold break through resistance, in the range of $1,660 to $1,670 an ounce, �given the rally [gold�s] had since the beginning of the year, and I think we could see some consolidation or even weakness in gold next week.� Gold futures have gained more than 6% year to date.

Gold traders also digested economic data on U.S. home sales: The National Association of Realtors said December existing homes sales rose 5% for the month to a seasonally adjusted annual rate of 4.61 million.

But November sales were revised down 4.39 million from 4.42 million, and economists polled by MarketWatch had expected sales to be running at 4.7 million for December. Read more about existing home sales.

U.S. data released Thursday showed initial jobless claims declining more than expected last week, to an April 2008 low, and consumer price inflation for December came in flat against expectations for a rise.

Against this backdrop, March silver futures �tacked on $1.17, or 3.8%, to end at $31.675 an ounce. Futures prices gained 7.3% for the week. Year to date, they�re up more than 13%.

For silver, there were likely a �bunch of shorts sitting at the 50-day moving average (at about $30.88), and when silver broke through it today, we saw a lot of short covering,� said Essaye.

Copper futures for March delivery �fell 5.6 cents, or 1.5%, to $3.745 a pound, but up 3% for the week.

Platinum for April delivery �rose $14.30, or 0.9%, to $1,532.30 an ounce. March palladium �fell $2.70, or 0.4%, to close at $675.70 an ounce.