US gold futures climbed early Wednesday as a weaker dollar against rival currencies sparked buying in the precious metals, dealers said. At 10:10 am EST (1510 GMT), gold for February delivery was up $3.90 at $426 an ounce on the New York Mercantile Exchange's COMEX division, trading from $421.40 to $426.80.
"In the absence of any particular fundamental change right now, people are very much trading off the currencies, with short-term technical parameters being guidelines and currencies being the main driver," said a New York gold desk trader.
But declining COMEX gold open interest recently, indicating reduced speculative participation, and a smaller fund net long position, should eventually pave the way for long accumulation in gold, market sources said.
Gold futures have been stuck in a trading range from about $400 to $459 over the last five months, and analysts see the action staying choppy in the near term as traders analyse currency moves and US economic data, as well as geopolitical developments.
Analysts said the Iraq presidential elections this weekend, followed by US president George W. Bush's State of the Union address and the Group of Seven meeting in February should keep traders on their toes.
Spot gold changed hands at $425.70/6.50, above Tuesday's late quote at $422.05/2.80. The London afternoon fix was $425.80.
Over-the-counter January options expire Wednesday and dealers said they zeroed in on strike prices around $420.
March silver gained 14 cents to $6.825 an ounce, dealing within a $6.695 to $6.85 band.
Prices of late have struggled up from the bottom of a $6.11 to $8.23 trading range.
Spot silver traded up to $6.78/81 from yesterday's late quote of $6.66/68. The fix was $6.72.
NYMEX April platinum rose $3.10 to $867 an ounce. Spot platinum fetched $864/868. March palladium dipped $1.55 to $191 an ounce. Spot was at $187/191.
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