Forexpros - Gold futures advanced  for the second day on Tuesday hitting the highest level since mid December on a weakening U.S. dollar and worries about a possible Greek default.   

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1651.55 a troy ounce during late U.S. trade advancing 1.27%.  

 Earlier prices hit a high of USD16367.95 surging 2.05%.   

Gold futures were likely to find support at USD1631.95 a troy ounce, Monday's low and technical resistance exists at USD1681.55, the high of December 13th.   

Weakness in the U.S. dollar worked to lift precious metal prices.  

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, gave back 0.30% to trade at 81.42.   

Interestingly, gold's correlation with the euro/dollar exchange rate is at its most positive in nearly 2 years. This means that gold is more likely to move in synch with the euro than at any other time since January 2010.   

The concern of a default by Greece continued, as talks aimed at negotiating the restructuring of the country’s debts remained deadlocked, amid disagreements over a bond swap with private creditors.

Without the swap, debt-stricken Greece is unlikely to secure a second financial bailout, raising fears over a possible disorderly Greek default in March, when massive bond payments are due.  

Earlier, Morgan Stanley stated in a report that it remained bullish on gold. The investment bank projected gold prices to average USD1,845 an ounce in 2012, as strong investment demand, central bank purchases and less hedging  force prices higher.
 

Gold prices lifted during the Asian trading session upon government data showing  China’s economy expanded at an annualized rate of 8.9% in the fourth quarter, slowing from the previous quarter’s 9.1% rate, but slightly better than expectations for an 8.8% increase.

While the data was better-than-expected, the nation’s economy grew at the slowest pace in more than two years and expanded less than 9% for the first time since mid-2009, fuelling speculation that Beijing was likely to ease monetary policy to stimulate growth  

Elsewhere on the Comex, silver for March settlement advanced 1.42% to trade at USD29.94 a troy ounce, while March copper futures soared 2.18% to trade at USD3.72 a pound.

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