By Claudia Carpenter and Kim Kyoungwha Dec. 31 (Bloomberg) -- Gold rose in London, heading for a ninth straight annual gain, on speculation climbing commodity prices and a weaker dollar will spur demand for the metal as a hedge against inflation. Bullion is up almost 25 percent this year, trading above $1,100 an ounce. Government spending aimed at reviving economies sent the Reuters/Jefferies CRB Index of 19 raw materials to its biggest gain since 1979. The dollar fell 2.5 percent against the euro this year, including a 0.5 percent drop today. “We are looking for gold to break $1,200 an ounce in January,” John Meyer, an analyst at Fairfax IS in London, said today by e-mail. Fairfax expects “a weakening dollar in the second half to help gold post new gains,” he said. Bullion for immediate delivery jumped $12.10, or 1.1 percent, to $1,105.01 an ounce at 9:19 a.m. local time. Gold futures for February delivery climbed 1.2 percent to $1,105.40 an ounce on the New York Mercantile Exchange’s Comex unit. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, was up 45 percent this year to 1,133.6 metric tons as of yesterday, according to the company’s Web site. “The overall trend of dollar weakness should continue into next year, providing incentives to gold investors,” Chris Yoo, head of global derivatives with Samsung Futures Co., said in Seoul. “Gold remains in investors’ favor until the U.S. raises interest rates after signs of global recovery become more pronounced.” Increased Weighting Gold may rise as investors buy futures to reflect the metal’s increased weighting in a benchmark raw-materials index. Twelve of 20 traders, investors and analysts surveyed by Bloomberg News, or 60 percent, said bullion would gain next week. Eight forecast lower prices. New York gold futures will make up 9.1 percent of the Dow Jones UBS Commodity Index in 2010, compared with 7.86 percent for this year, according to Dow Jones Indexes/STOXX Ltd. The gauge will be rebalanced from Jan. 11 to Jan. 15, said Dow Jones spokeswoman Andrea Weidemann in Frankfurt. The change will boost gold “definitely, particularly should more money be allocated to commodities in 2010 as we at Midas forecast,” said Tom Winmill, New York-based portfolio manager of the Midas Fund. The precious-metal fund has $120 million in assets and gained 83 percent this year through Dec. 29, he said. Midas forecasts that gold will average $1,300 an ounce in 2010 and rise to $1,500 an ounce, according to Winmill. Among other precious metals for immediate delivery in London, platinum gained 1.8 percent to $1,471.50 an ounce and silver added 1.6 percent to $17.0675 an ounce. Palladium climbed as much as 3.5 percent to $407.75 an ounce, the highest price since July 2008, and was last at $406. To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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