Dec. 19 (Bloomberg) -- Gold gained for a second day in New York, rebounding from last week’s plunge, as concern about Europe’s debt crisis spurred demand for the metal as a protection of wealth.

Gold dropped last week as the dollar climbed to an 11-month high versus the euro. The greenback was little changed today. Fitch Ratings lowered its outlook for France’s credit ranking to negative from stable on Dec. 16, saying the country’s budget deficit and government borrowings make it more vulnerable to the region’s debt crisis than other top-rated euro-zone nations.

“Gold suffered from a renewed rush for dollar liquidity, but in the long run its outlook remains solid,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. “Accommodative monetary policy across the globe will continue to secure gold’s inflation hedge role.”

Bullion for February delivery rose 0.6 percent to $1,607.20 an ounce by 8:23 a.m. on the Comex in New York. Prices dropped 6.9 percent last week, the most since Sept. 23, and touched a two-month low of $1,562.50 on Dec. 15. Immediate-delivery gold was up 0.4 percent at $1,605.10 in London.

Prices will average $1,810 next year as central banks buy between 400 metric tons and 600 tons, Goldman Sachs Group Inc. said today in a report. It has averaged $1,572 this year.

ETP Holdings

Gold, up 13 percent this year, reached a record $1,923.70 on Sept. 6 as investors sought to diversify away from equities and some currencies amid concerns that the euro zone may fragment. Since then, it’s lost 16 percent. Holdings in exchange-traded products backed by bullion dropped 1.3 tons to 2,346.2 tons on Dec. 16, data compiled by Bloomberg show. Assets reached a record 2,360.8 tons on Dec. 14.

The dollar gained as much as 0.5 percent versus the euro today after North Korean state television said national leader Kim Jong Il died, spurring concern instability may increase in the region and boosting demand for the U.S. currency as a haven.

“Gold is still an attractive investment, and while a stronger dollar will cap gains, prices should remain supported as there are many buyers looking out for a bargain,” said Tao Jinfeng, chief investment consultant at Haitong Futures Co., China’s largest brokerage by registered capital.

Silver for March delivery fell 1.4 percent to $29.31 an ounce, taking its loss this year to 5.2 percent.

Platinum for January delivery was little changed at $1,420.50 an ounce and is down 20 percent this year. Palladium for March delivery was little changed at $626.35 an ounce. Prices dropped 22 percent in 2011.

--Editors: Sharon Lindores, Nicholas Larkin

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.ne

Source: http://www.businessweek.com/news/2011-12-19/gold-gains-in-new-york-as-concern-about-europe-spurs-demand.html