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Gold hits 3-week high on currency

NEW YORK/LONDON (Reuters) - Gold hit a three-week high above $960 an
ounce Friday on the back of strong investment demand and buying linked
to the initial dollar weakness, but lackluster U.S. consumer sentiment data
prompted profit-taking in the metal.

The price of gold has been largely confined to a trading range between
$930 and $960 in the past three months, as the metal was pressured by a
resurgent dollar but supported by long-term inflation worries and lingering
economic uncertainties.

"The precious metals rallied on playing catch-up to the dollar weakness
from yesterday afternoon, as well as bullish technical signals," said Miguel
Perez-Santalla, vice president of sales at Heraeus Precious Metals
Management in New York.

Gold futures, however, retreated from session highs as a mixed bag of
economic indicators, including a drop in U.S. consumer sentiment,
prompted the dollar to turn higher against the euro late in the session.

The dollar typically moves in the opposite direction to the metal.

U.S. December gold rose to a session high of $964.60, its loftiest price
since August 7. It settled up $11.50, or 1.2 percent, at $958.80 an ounce on
the COMEX division of the New York Mercantile Exchange.

Spot gold at $956.40 an ounce at 2:06 p.m. EDT (1806 GMT), against
$946.75 an ounce late in New York on Thursday.

Perez-Santalla said bullion holdings in gold exchange-traded funds rose
to a recent high on Thursday, and selling of physical gold has also slowed
down.

Holdings of Julius Baer's (BAER.VX) gold-backed exchange-traded fund
rose 43,600 ounces, or 2 percent, in the week to August 26.

Saxo Bank senior manager Ole Hansen said that, in the near term, the
dollar will still predominantly be the currency that is in the driving seat.

"That has managed to tip (gold) through a technical level where new
buying and short-covering has been triggered this morning, and that has
given us a bit of momentum on the upside," Hansen said.

SILVER RISES

Silver was also helped by gains in base metals, with copper up more than
4 percent. Silver, also used as an industrial metal, was last at $14.76 an
ounce from $14.24.

Platinum was supported by a strike at South Africa's Impala Platinum
(IMPJ.J) and news that a union had rejected the latest wage offer from
Anglo Platinum (AMSJ.J), the world's largest producer of the metal.

Platinum was at $1,243 an ounce against $1,240.50, and palladium was at
$285.50 against $284. South Africa is the source of four-fifths of the world's
platinum.

The National Union of Mineworkers said Implats, the world's No. 2
platinum producer, had failed to secure a court order to stop the strike.
Some workers at its Rustenburg mine have been on strike since
Wednesday.

But a rise in platinum stocks after demand fell for the autocatalyst material,
news of capacity cuts from Toyota earlier this week, and hopes industrial
action will be resolved quickly are limiting gains, analysts said.

"The market reaction to these supply interruptions help confirm our view
that this is not an attractive tactical entry point into new long platinum
positions," said UBS analyst John Reade in a note.