Tokyo gold futures rallied over 2.5 percent to a two-week high on Monday as firmer oil prices encouraged Japanese investors and funds to rebuild new buy positions after heavy liquidations over the past few weeks.
The key Tokyo Commodity Exchange gold contract for August 2007 delivery jumped by the daily 60-yen limit to 2,299 yen a gram the highest since October 2. The technical trend improved as the key October TOCOM contract has jumped about 7 percent since falling to a 3-1/2 month low of 2,143 yen on October 5.
"The market appears to have bottomed out. The mood of the market is improving," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management. "Gold could extend gains in the near term as many investors could take new positions after lightening them actively in the past few weeks."
The August TOCOM gold contract closed up 59 yen or 2.64 percent at 2,298 yen. Two other gold contracts closed up by 58 yen and the remaining three contracts rose by the daily 60 yen limit. Kageyama said the market is watching this month's high of 2,316 yen as the next key technical resistance. TOCOM gold also gained support due to the yen's weakness against the dollar.
A weaker yen against the dollar makes yen-denominated commodities more expensive in the dollar-billed export market, which normally leads to higher prices for TOCOM gold, although it is potentially negative for dollar-based gold prices. The dollar held near a 10-month peak against the yen after last week's upbeat US data on retail sales and consumer sentiment crushed expectations for the Federal Reserve to cut rates next year.
The dollar was around 119.45 yen, down slightly from late New York on Friday. The euro eased to around $1.2500 from $1.2513. Cash gold hit a two-week high in Asia on Monday on safe-haven buying due to tensions on the Korean peninsula and as crude oil rose above $59 a barrel.
But dollar firmness trimmed gains and investors were keen to take profits at higher levels. Spot gold was trading higher at $591.70/592.70 an ounce from $588.80/589.80 late in New York. It had reached a high of $592.50 in Asia. Crude oil climbed above $59 a barrel after Opec called an emergency meeting later this week on output cuts. Other TOCOM precious metals were bolstered by the firmness in gold, with platinum futures up by more than 1.5 percent and silver up by over 2.5 percent.
TOCOM platinum jumped as speculators actively covered positions after seeing it being supported at slightly below 4,000 yen in last two weeks. "The fact that falls in platinum were limited was very important. People now think that platinum is very solid below 4,000 yen," Kageyama said.
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