Gold rises 4 pct as dollar weakens, commods rally

By Jan Harvey

LONDON (Reuters) - Gold rose more than 4 percent on Monday as dollar weakness and sharp gains across commodities sharpened appetite for the precious metal, but retreated from highs as the dollar recovered some lost ground against the euro.

A near $600 billion economic stimulus package announced by China on Sunday helped allay risk aversion and fuelled gains in equities as well as oil and base metals, carrying gold higher.

Spot gold hit a peak of $767.80 an ounce, before easing back to $751.10/753.10 by 1552 GMT, against $735.95 late in New York on Friday.

U.S. December gold futures rose more than 2 percent and were trading at $751.30, up $17.10.

"The weakness in the U.S. dollar... and the rise in crude oil and industrial metals reflect the announcement made by Chinese government yesterday for a stimulus package of roughly $568 billion," said Dresdner Kleinwort consultant Peter Fertig.

"This should spur investment in housing and infrastructure in the next two years, which will (lead to) stronger demand for energy and base metals. This is also a supportive factor for gold."

China launched its stimulus plan on Sunday, pledging nearly $600 billion in extra spending by the end of 2010.

Base metals jumped in response to the plan, with copper surging nearly 10 percent, nickel 13 percent and zinc around 7 percent following the news. All the metals have lost substantial ground in recent months.