Dec. 26 (Bloomberg) — Gold prices rose the most in a week as mounting tensions in the Middle East and South Asia boosted the appeal of the precious metal as a haven.

Palestinian militants yesterday launched their biggest rocket attack on southern Israel in at least six months after a truce expired Dec. 19. Pakistani troops are being diverted from tribal areas near Afghanistan to the border with India, the Associated Press reported. Gold gained 4 percent this week.

“The only possible explanation for gold’s gains are the geopolitical tension in Gaza and in India and Pakistan,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.

Gold futures for February delivery climbed $23.20, or 2.7 percent, to $871.20 an ounce on the Comex division of the New York Mercantile Exchange, the biggest gain for a most-active contract since Dec. 17. The metal is up 6.4 percent this month.

Silver futures for March delivery gained 18 cents, or 1.7 percent, to $10.53 an ounce. The metal is still down 29 percent this year.

Indian Foreign Minister Pranab Mukherjee stepped up diplomatic pressure on Pakistan to act against those behind last month’s Mumbai terrorist attacks.

India is the world’s biggest buyer of gold, accounting for more than 20 percent of purchases last year, according to the World Gold Council.

Some investors buy gold as a haven when military tensions threaten to disrupt financial markets. Crude oil rallied as much as 7.2 percent.

The Middle East was responsible for 31 percent of global oil production in 2007, according to BP Plc, which publishes its annual Statistical Review of World Energy each June.

Gold, Oil Rally

“Not since 1967 is it so obvious there is going to be a war in the Middle East that will send gold and oil well past this year’s highs,” said Ralph Preston, a commodity analyst at Heritage West Financial Inc. in San Diego.

Gold, up 4 percent this year, is the only metal poised for an annual gain. Bullion may attract investors seeking a store of value as the dollar weakens and yields on short-term U.S. Treasury notes fall below zero.

“Gold may be a good place because it is competing against zero rate of return,” said Ron Goodis, a retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “When most else is unsafe, or yielding virtually nothing, at least gold has some historical significance.”

The Federal Reserve on Dec. 16 slashed the benchmark lending rate to almost zero from 1 percent. The federal-funds rate was at 5.25 percent in September 2007 when policy makers began to cut borrowing costs as the economy headed into a recession.

Platinum Gains

Platinum prices rose the most in almost three weeks on speculation that U.S. car sales will pick up after the Fed allowed lender GMAC LLC to convert to a bank.

GMAC’s shift eases the threat of a default that threatened to dry up credit for General Motors Corp. dealers who used the lender to finance about three-quarters of their inventories. GMAC also handled loans for about 35 percent of GM’s 2007 retail buyers. Automakers account for 60 percent of global platinum use, according to Johnson Matthey Plc.

“Platinum has some support,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Anything that helps consumers finance car loans should help lift car sales a little bit.”

Platinum futures for April delivery gained $31.10, or 3.6 percent, to $894.50 an ounce on the Nymex, the biggest gain since Dec. 8.

Palladium futures for March delivery rose $1.10, or 0.6 percent, to $176 an ounce. Platinum and palladium are used in pollution-control devices in cars. The metals have tumbled more than 41 percent this year as auto sales plunged.

Dec. 22 (Bloomberg) — Gold rose, halting a two-session slide, as a decline in the dollar revived the appeal of the precious metal as an alternative investment. Silver was little changed.

The dollar dropped as much as 1.2 percent against a weighted basket of six major currencies following a 3 percent gain in the previous two sessions. Gold’s rebound from a 13- month low in October has left the metal up 1.1 percent for the year and heading for an eighth straight annual gain.

“Gold’s trading off the dollar,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “A weak economy and all-time low interest rates don’t call for a strong dollar.”

Gold futures for February delivery rose $9.80, or 1.2 percent, to $847.20 an ounce on the New York Mercantile Exchange’s Comex division. The metal gained 11 percent in the previous two weeks.

Silver futures for March delivery rose 1 cent to $10.86 an ounce. The metal has dropped 27 percent this year.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose to a record 775.3 metric tons last week. The Federal Reserve cut its benchmark interest rate to the lowest ever on Dec. 16, to between zero and 0.25 percent, in a bid to revive the economy.

Interest-Rate Cuts

Gold reached a record $1,033.90 on March 17 as rate cuts sent the dollar to an all-time low against the euro in July. The federal-funds rate was at 5.25 percent in September 2007 when policy makers began cutting their benchmark as the economy headed into a recession.

“We’re not going to get any revelations on the economy soon,” Lesh said. “Those who want to hold gold are still looking at a shaky equity market worldwide.”

Gold is the fourth-best performer on the Reuters/Jefferies CRB Index of 19 raw materials this year behind cocoa, hogs and sugar. The Standard & Poor’s 500 Index has dropped 41 percent in 2008.

Gold may finish the year around $850, Societe Generale said in a report on Dec. 19. The metal faces selling around $915 and support around $800, the bank said.