Gold rallies as dollar dips

CHICAGO, Feb. 28 (Xinhua) -- Gold futures on the COMEX Division of the New York Mercantile Exchange recovered on Tuesday, as U.S. dollar lost some ground against the euro, on speculations that a European Central Bank (ECB) allotment of three-year loans to banks Wednesday might boost investor appetite for the region's assets.

The most active gold contract for April delivery jumped 13.5 dollars, or 0.8 percent, to 1,788.4 dollars per ounce.

The precious metal jumped to a three-month high, following euro and U.S. equities, on rising inflation concerns boosted by an expected ECB move to provide a second round of unlimited funds on Wednesday to support banks.

The euro strengthened against U.S. dollar while the bond risk was dropped, as analysts expected the European banks would probably tap the ECB for around 632 billion dollars in three-year funds.

Traders believed that gold got a boost on Tuesday as it offered protection against a weak currency or high domestic inflation levels.

Meanwhile, the May Silver Futures contract outperformed gold as it closed more than 4 percent higher and settled at 37.205 dollars per ounce.

"Due to the price differential between gold and silver, many investors may choose silver as a 'better bang for their buck'," said Mike Daly, a gold specialist with PFGbest here in Chicago.

Silver for May delivery surged 1.601 dollars, or 4.5 percent, to 37.205 dollars per ounce.