Gold rebounds as dollar tumbles

Gold rebounded after two days of decline as the dollar slipped against majors, thereby increasing the appeal of the metal as an alternative investment.

The dollar index, which tracks the dollar movements against a basket of six currencies, slipped to a low of 79.67 compared with the day's opening price at 79.99.

Accordingly, dollar-dominated commodities pared theirlosses where oil advanced to a high of $89.40 a barrel from yesterday's closing of $88.47, while spot gold surged to a high of $1392.31 an ounce after it recorded a low of $1380.10.

Among other precious metals, platinum edged up to $1688.50 from the day's opening at $1683.70, palladium rose to $738.50 from $730.70 and silver steadied around $28.68, as of 08:55 GMT.

Still, no one can judge whether gold has ended its rally or not as still the factors that triggered it are persisting. Gold bounced near 30% this year as store of wealth and inflation hedge.

Central banks all over the world kept interest rate at low level while pumping trillions to boost recovery.

Later in the day, BoE will announce its rate decision and APF quantity for the month of December with expectations to hold both unchanged, whereas next week eyes will be on US rate decision, especially after Bernanke's announcement that he may increase QE2 beyond the $600 billion announced last month.

With regard inflation, it is high in many major economies, especially China which is expected to raise interest rate and tighten monetary policy this weekend.

Also, tensions are still ongoing in the Korean peninsula between the two Koreas.

On the physical side, imports from China rose in the first 10 months of the year by five folds while demand from India is predicted to continue till mid-December due to the wedding season.

The shiny metal fell from all-time high of $1430.96 an ounce recorded on December 7 as the rise encouraged investors to lock in gains.

The previous session, gold shed $19.80 or 1.41% to close at $1381.85, while gold price was setin London at $1385.00 per ounce declining from $1395.00 during the AM fixing.

SPDR gold trust, the world's largest exchange-traded fund backed by bullion,retreated to 1,295.29 metric tons on December 8 from 1,297.72 on December 7.