Gold rose in New York, heading for the biggest weekly advance in five, on speculation central banks may increase holdings after South Korea bought bullion to diversify assets.

The Bank of Korea, owner of the world's eighth-biggest foreign-exchange reserves, purchased 15 metric tons of gold last month, said Lee Jung, head of its investment-strategy team. Gold has climbed 24 percent this year in New York as investors and central banks bought the metal as an alternative to stocks, bonds and currencies.

South Korea has huge reserves, Arne Lohmann Rasmussen, head of rates, foreign-exchange and commodities strategy at Danske Bank A/S, said by phone from Copenhagen Friday. "When they are buying gold, it's supportive for the market."

Gold for February delivery climbed 1.1 percent to $1,758.90 an ounce by 8:16 a.m. on the Comex in New York. Prices are up 4.2 percent this week, the most since the week ended Oct. 28. Bullion for immediate delivery gained 0.6 percent to $1,755.10 in London.

Central banks are expanding reserves for the first time in a generation as the metal is in the 11th year of a bull market. Purchases of as much as 450 tons in 2011 may be repeated next year as Asian nations and emerging economies diversify reserves, UBS AG said Nov. 30. Third-quarter central-bank purchases jumped more than sixfold to 148.4 tons, according to the World Gold Council.

Stronger Euro
           
Prices also increased as the euro climbed against the dollar. Gold and the U.S. currency tend to move inversely.

The slightly weaker dollar is also helping gold and commodities, Rasmussen said.

Gold slipped to $1,751 an ounce in the morning in London, used by some mining companies to sell output, from $1,752 at yesterday's afternoon fixing.

Palladium for March delivery jumped as much as 5.2 percent to $663 an ounce and was last at $653.95. The metal, used in pollution-control equipment for vehicles along with platinum, is up 14 percent this week, the most since October 2008.
           
U.S. light-vehicle sales rose at the best pace in two years in November. Auto-sales figures from the country are positive for platinum-group metals,UBS analyst Edel Tully wrote in a report today.
           
Four of the six largest automakers by sales beat expectations, boosting the industry total to a 13.6 million seasonally adjusted annualized rate, according to Autodata Corp. That exceeded the 13.4 million average estimate from 14 analysts surveyed by Bloomberg and was the best month since August 2009.
           
Silver for March delivery gained 2.1 percent to $33.435 an ounce. Prices are up 7.5 percent for the week, on course to climb the most in five weeks. Platinum for January delivery advanced 0.6 percent to $1,566.50 an ounce.

(Bloomberg)