LONDON (Reuters) - Gold extended gains to rise nearly 3 percent on Thursday as the dollar lost ground against the euro, boosting the precious metal's appeal as a currency hedge.
Gold and platinum prices traded at within $5 of one another, threatening to breach parity for the first time in 12 years, as platinum remained rangebound ahead of a decision on a $14 billion plan to bail out U.S. carmakers.
Platinum, which is mainly used as a component in catalytic converters, is particularly vulnerable to a downturn in the auto sector.
Spot gold hit a high of $832.30 an ounce and was quoted at $830.80/832.80 an ounce at 1304 GMT (8:04 a.m. EST), up from $809.90 in New York late on Wednesday. Spot platinum was at $837.50/857.50 an ounce against $822.
U.S. gold futures for February delivery rose more than 3 percent to a high of $834.90 an ounce, and were later quoted at $833.00, up $24.20.
"The spread between gold and platinum has now shrunk," said Pradeep Unni, a senior analyst at Richcomm Global Services. "This directly signals the current economic crisis and the downturn in auto-sector industry."
"If the auto market bailout goes through, the spreads may widen again," he added. "Gold meanwhile is recovering with the euro's gain."
The precious metal is often bought as an alternative asset to the dollar and tends to move in the opposite direction to it.
The U.S. currency hit a six-week low against the euro, as doubts crept in over whether projected pent-up demand for the currency would materialize over year-end.
The other main external driver of gold, the oil price, was also supportive, ticking up more than 4 percent as signs emerged that top exporter Saudi Arabia had slashed January supplies ahead of next week's meeting of oil cartel OPEC.
Crude also received a fillip from the International Energy Agency's monthly report, which said it saw global demand growing in 2009 and expected OPEC to cut supplies next month.
Rising oil prices help support interest in commodities as an asset class, and can boost gold's appeal as an inflation hedge.
"Precious metals may get further support today if such oil price volatility is repeated," Standard Bank analyst Manqoba Madinane said.
SHARES SLIP
However, soft equity markets may keep a lid on gold's gains.
