Gold rose on Tuesday as Japanese futures rebounded after the yen's rally against the dollar fizzled out, but dealers remained cautious and expected the metal to trade in a tight range in coming days.
Spot gold rose as high as $556 an ounce before retreating to $555.10/556.10 an ounce, after $554.70/555.50 late in New York on Monday. Gold fell nearly $4 in the US market as investors booked profits from last week's two-week highs and also because of softer crude oil prices.
Gold jumped last week after news of a suicide attack on an oil facility in Saudi Arabia sparked a rally in crude oil prices. Gold can be purchased as a hedge against inflation and for future sale in times of trouble.
The metal has fallen more than 3 percent since climbing to a 25-year high around $575 in February when investors diversified into the metal because of rising energy costs, uncertainty over the dollar's outlook and Middle East tension.
"The charts are pointing down at the moment but I don't know whether those guys want to press the 'sell' button. I think today's trading range will be $550 to $557," said a dealer in Singapore. US light crude for April delivery was down 46 cents at $60.54 a barrel, erasing some of the gains made on Friday, when markets were spooked by al Qaeda's failed attack on the Saudi oil facility.
In Japan, benchmark gold futures on the Tokyo Commodity Exchange, currently February 2007 rose four yen per gram to 2,108, having fallen as low as 2,094 yen. The yen fell from a one-month high against the dollar after the Japanese currency's rally on speculation about a near-term end to the Bank of Japan's super-easy monetary policy ran out of steam.
It hit a high of 115.68 per dollar on electronic trading platform EBS on Monday. Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, said dealers would now focus on tension in the Middle East over Iran's nuclear ambitions as well as the US Federal Reserve meeting in March.
"There are so many uncertainties.
If it stabilises here, I think the market has a chance to go up to retest $575," he said. Iranian Foreign Minister Manouchehr Mottaki said on Tuesday Tehran would not give up its nuclear programme, but added that talks with Russia to jointly enrich uranium would ease international concern over its atomic ambitions.
Platinum rose to $1,036/1,041 from $1,032/1,036 an ounce. Sister metal palladium was at $280/285 an ounce from $279/283. Silver edged down to $9.62/9.66 an ounce from $9.64/9.67.
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