Gold advances on weaker dollar

Gold rises for the second day as the dollar drops to five-week low versus the European single currency, increasing demand on the metal as alternative investment.

After the European debt crisis has slightly eased after European Finance chiefs have pledged to strengthen safety to debt-laden economies, gold took a boost from the dollar weakness.

The dollar dropped for the second day setting to end the second consecutive week on decline ahead of the release of important housing data later in the day.

US housing starts are expected to fall 0.9% to 550,000 in December after surging 3.9% in November, where the drop in housing starts is raising speculations the Fed will keep interest rate low in their coming meeting next week.

The dollar index, which traces the greenback's performance against six major currencies, slipped to a low of 78.43 from the day's opening at 78.95.

Accordingly, gold rose to touch a high of $1375.19 an ounce while it is currently trading near the day's high at $1375.15, while oil soared to $91.80 a barrel from the day's starting level at $91.20.

The previous session, gold added $6.20 or 0.46% to close at $1368.05, while gold price was setin London at $1369.50 per ounce inclining from $1368.75 during the AM fixing.

The yellow metal, however, may benefit again from the European debt crisis that helped gold to advance 30% in 2010 as European Finance chiefs did put a confirmed agreement and preferred to postpone expanding the 440 billion-euro package, knowing that the deadline is in March.

Among other precious metals, platinum hovered around $1841.00, palladium surged to $818.50 from the day's opening level at $816.00 and silver soared to $29.39 from $29.12, as of 07:55 GMT.