Gold's 10 pct gain in 2011 extends run to 11th year

NEW YORK (Dec 30):'' Gold rose 1 percent on Friday, rebounding from
losses earlier this week that sent the market briefly into bear
territory, and the metal sealed its 11th consecutive year of gains.

Bullion posted a gain of 10 percent for 2011, its smallest annual rise
in three years. It remains down 18 percent from a record $1,920.30 set
in September, and finished the fourth quarter with its first quarterly
loss in more than three years. Analysts said a rebound rally is possible
in the near term but gold is far from retesting all-time highs.

"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.

Spot gold rose 1.2 percent to $1,564.69 by 2:26 p.m. EST (1926 GMT),
but it has limped into the end of the year with a 10 percent drop in
December.

Gold fell heavily in December, as hedge funds
scrambled for cash to meet client redemptions and European banks trimmed
their gold holdings to raise capital. U.S. February gold futures
contract settled up $25.90 at $1,566.80, snapping six straight sessions
of losses.

The metal enters the new year on an uncertain footing and appears to have lost its safe-haven status.

"We think gold could struggle into the first part of 2012 and
potentially drop into the $1,300 to $1,450 region," said Mark Arbeter,
chief technical strategist of S&P Capital IQ. "...considering that
gold remains in a decade-long bull market, in our view, we think a major
bottom could be seen in the weeks ahead," Arbeter said.

Gold
was one of the top-performing assets in 2011, giving investors a return
of 10 percent, but it underformed U.S. 10-year Treasuries, which
returned about 17 percent and Brent crude oil, which gained around 14
percent.

DEATH CROSS LOOMS

Despite Friday's rally, technical factors suggest gold's momentum has turned bearish.

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.

"When you
start seeing a lot more bearish technical events occurring, more and
more shorter-term traders are inclined to selling their positions," said
Adam Sarhan, chief executive of Sarhan Capital.

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 real
money from the money managers coming back to this market. They have been
absent throughout December," Saxo Bank senior manager Ole Hansen said.
Managed money's bullish futures position was at its lowest since early
2009, CFTC data showed, a sign that investors were bailing out of the
market.

Silver rose 0.4 percent to $27.85, down 9.5 percent in 2011 for its first loss in 3 years.

Platinum was up 1.6 percent at $1,391.24 and palladium jumped 2.8 percent at $647.50. - Reuters