US gold jumps 1.5 pct on oil surge; volatility seen

NEW YORK, Jan 2 (Reuters) - U.S. gold futures jumped 1.5
percent in heavy trading early on Wednesday, largely driven by
a surge in crude oil and a slide in the dollar. Platinum in New York also rallied to hit a contract high,
boosted by tight market fundamentals and lofty lease rates. Jonathan Jossen, an independent floor trader in New York,
cited simmering geopolitical tensions due to an unstable
Pakistan, a $2 spike in oil because of renewed violence in
Nigeria and a weak dollar. "Volatility is very high. It's the highest that it has been
for a long time," Jossen added. At 10:22 a.m. EST (1522 GMT), most-active gold futures for
February GCG8 rose $13, or 1.5 percent, at $851 an ounce on
the COMEX metals division of the New York Mercantile Exchange,
trading between $837.50 and $852.30. Spot gold , which traded just below its all-time peak
on Wednesday, also provided a psychological boost to the
futures market, Jossen said. Spot gold hit a 28-year high of $848.60 an ounce, just
below its record high of $850 set in January 1980. It traded at
$846.70/$847.40 by midmorning, against Monday's late quote of
$832.60/$833.40 in New York. Jossen said that buy stops could be seen above the $847
support level. However, option trading had slowed as
investors took profits, he added. "Although conditions remain on the thin side, as part of
the trade will not return until Monday, the move (in gold)
suggests that funds may have made additional moves into
bullion, with Pakistan remaining on edge and investors nervous
about financial markets," Jon Nadler, senior analyst at Kitco
Bullion Dealers in Montreal, told clients in a note. For platinum, tight supply combined with booming demand due
to an increasing use of the metal in auto catalysts stirred
fund buying, analysts said. Johnson Matthey (JMAT.L: Quote, Profile, Research), the world's main platinum refiner
and fabricator, said in November the platinum market would see
a deficit of 265,000 ounces in 2007. "As with the other precious metals, platinum remains
vulnerable to some long selling, should the dollar begin to
recover, but with the market still extremely tight and lease
rate firm the metal will remain underpinned, with chart support
expected at $1,515/1,490 (spot)," James Moore, analyst at
TheBullionDesk.com, told clients in a note. On the NYMEX, April platinum PLJ8 hit a contract high of
$1,552 an ounce. It was up $19.60, or 1.3 percent, at $1,545 an
ounce. Spot platinum was quoted at $1,542/$1,546, after
surging to a record $1,544. March silver SIH8 was up 26 cents, or 1.8 percent, at
$15.18 an ounce. Spot silver was at $15.04/15.09 an
ounce, compared with New York's late Monday quote of
$14.77/14.82. March Palladium PAH8 was down $2.70 at $375.50 an ounce.
Spot palladium fetched $369/$372.
(Reporting by Frank Tang; Editing by Walter Bagley)