By Rujun Shen SINGAPORE (Reuters) - Gold rose nearly one percent on Thursday, buoyed by a pause in a dollar rally after soft U.S. inflation, while short-covering buying also helped. U.S. core consumer inflation touched a record low in October and new home building sagged, lending support to the Federal Reserve's move to boost the sluggish economy through additional monetary easing. The dollar lost about 0.2 percent against a basket of currencies, after rallying to seven-week highs. "People expect the dollar to further deteriorate, which gives a strong incentive to buy into gold," said Ellison Chu, a senior manager at Standard Bank in Hong Kong, adding that short-covering was seen around the current price level. "They are building up another round of long positions." Spot gold gained nearly one percent to $1,348.55 an ounce by 0316 GMT, after falling for four consecutive sessions. U.S. gold futures rose by 0.8 percent to $1,347.8. Spot gold is expected to fall to $1,317 per ounce as a bear trend has established and a wave "c' or wave "3" will unfold, said Wang Tao, a Reuters market analyst. For a 24-hour gold technical outlook, see: here Robust physical demand in the region has also lent support to prices, dealers said. SILVER, PALLADIUM RALLY Spot silver rose as much as 2.3 percent to $26.21 an ounce, before easing to $26.17. "The price drop from $29 to $25 last week was a bit exaggerated," said Chu of Standard Bank, "Many expect silver to be around $26 and $27. There's quite a lot of silver buying." Silver is likely to rise above $30 and average $28 in 2011, lifted by strong investment buying and recovering fabrication demand, precious metals research and consulting firm GFMS said. Holdings in the iShares Silver Trust, the world's largest physically-backed exchange-traded fund, rose to a record high of 10,773.56 tonnes. The fund's holdings gained five percent in the past month, in comparison with just 0.3 percent rise in holdings of the SPDR Gold Trust over the same period of time. Spot palladium rose 2.4 percent to an intraday high of $676, before softening to $672.97. Speculation on diminishing palladium stockpiles has also lent support to prices. A lack of sales from Russian state palladium stocks could leave the market "substantially in deficit" in the years to come, refiner Johnson Matthey warned as it launched its Platinum 2010 Interim Report. "We still see Russian ingots supplies, and do not think the Russian problem is very serious right now. But it is a good excuse for speculators," said a Tokyo-based trader.

Source