(REUTERS) -- Gold rose two percent on Friday in a rebound rally, boosted as the euro rose against the dollar and as investors covered short positions the session after the metal hit a six-month low and briefly entered bear-market territory.
Bullion is heading for a gain of around 10 percent for 2011, its 11th straight year of gains. But it remains down 18 percent from a record $1,920.30 set in September, set for its first quarterly loss in more than three years.
Gold's technical set-up since late yesterday could be the start of a bullish reversal and a short-term bottom, said Michael Matousek, senior trader at U.S. Global Investors Inc, which has $2.5 billion in assets.
It is completely reasonable to be up $100 from here by the end of January or February on technical support, Matousek said.
Spot gold rose 1.9 percent to $1,574.99 by 12:50 p.m. EST (1750 GMT), but it has limped into the end of the year with a 10 percent drop in December.
U.S. February gold futures contract gained $35.90 to $1,576.80, on track to snap six straight sessions of losses.
Despite Friday's rally, technical factors suggest gold's momentum has turned bearish. The 20-day moving average fell below its 200-day moving average, and the brief foray into a bear market suggest a further pullback could be on its way.
Bullion's 20-day moving average (DMA) dipped below its 200 DMA on Thursday, in what technical analysts termed a death cross, as short-term momentum has turned more negative than long-term momentum and could show that the current downtrend is pervasive.
Any time there is a death cross. The market is telling us that the underlying strength has changed from bullish to bearish, said Adam Sarhan, chief executive of Sarhan Capital.
When you start seeing a lot more bearish technical events occurring, more and more shorter-term traders are inclined to selling their positions, Sarhan said.
Gold gave investors a return of 11 percent in 2011, but it underformed U.S. 10-year Treasuries, which returned about 17 percent; Brent crude oil, which gave around 14 percent; and German 10-year Bunds which returned 31 percent.
In recent months, gold has often shed its traditional safe-haven status as investors liquidated positions to free up cash as the euro zone debt crisis caused money markets to seize up.
We need to see the hot money from speculators, we need to see real money from the money managers coming back to this market. They have been absent throughout December, Saxo Bank senior manager Ole Hansen said.
Silver rose 1.8 percent to $28.22, platinum was up 1.9 percent at $1,395.74 and palladium jumped 3.9 percent at $653.97.