Gold rebounds in London

Gold bounced back on Friday as buying interest resurfaced on price dips and as traders saw a limited impact on air travel and oil demand from an aircraft bomb plot.
Spot gold climbed 1.6 percent to hit an intra-day high of $645.05 an ounce, up from $634.80/635.55 in New York late on Thursday, when the metal dropped more than 2 percent. It was quoted at $643.75/644.50 by 1444 GMT.
Prices were likely to move towards the upper end of their recent range because of an expected rise in oil prices and a drop in the dollar in the coming months, Barclays Capital said.
"We expect the reaction in the oil market to have been somewhat overdone and we see the potential for oil to test new highs in the months ahead on a combination of strong demand, disappointing supplies and heightened geopolitical risks."
Oil rebounded from a three percent fall as traders saw a limited impact on air travel from an attempted transatlantic aircraft bomb plot and fretted over Middle East violence.
The suspected plot raised the spectre of strikes to rival the September 11, 2001 attacks on the United States that killed about 3,000 people and came 13 months after four British Muslim suicide bombers killed 52 people on London's transport network.
"The market seems to be waiting for something that could drive prices either up or down," said Michael Widmer, precious metals analyst at Macquarie Bank.
"Going forward ... because you have got the slowdown in the US economy, because you have got interest rates peaking and because you still have inflationary pressures - it will become more challenging for the US dollar to stay strong."
Gold often moves in the opposite direction of the dollar as the metal is generally seen as an alternative investment. Safe-haven bullion is also seen as a hedge against inflation. "We recommend investors use any further dips in gold to build medium-term long positions... We still see gold materially higher on a three and twelve month view," UBS Investment Bank said in a daily note.
Gold rose initially on Thursday after British police uncovered the plot, but profit-taking erased most of the gains and gold tumbled to a one-week low at $633.90 an ounce.
Some dealers said gold remained attractive because of firm oil and the month-old war in the Middle East.
Top Western diplomats converged on the United Nations on Friday to try to halt Israel's month-old war with Hizbollah guerrillas in Lebanon, where Israeli air raids killed another 15 people.
In other metals, platinum rose to $1,246/1,252 an ounce from $1,238/1,243 late in New York, while palladium was flat at $319/324 an ounce. Silver rose to $12.25/12.35 an ounce from $12.04/12.14 in the US market.