Gold held firm on Thursday, supported by the dollar's tumble to record lows, uncertainty in financial markets and firmer oil prices. Platinum also was strong - trading at Wednesday's 10-month peak of $1,348 an ounce on expectations of higher demand over coming months for jewellery and industrial use.
Spot gold rose as high as $735.90 an ounce before paring gains. It was quoted at $730.50/731.00 by 1441 GMT, against $728.10/728.90 late in New York on Wednesday. Bullion hit a 28-year high of $739 on Friday.
"The main driver is still the dollar," Suki Cooper, an analyst at Barclays Capital, said. "Then you've got a supply/demand imbalance. We see the market in deficit this year and that is being driven by jewellery demand from India and China," she said. The dollar fell to an all-time low against a basket of major currencies on concerns over the impact of the slowdown in the US housing sector on the broader economy.
A falling US currency makes dollar-denominated metals cheaper for investors in other currencies. The metal is also seen as a hedge against oil-led inflation.
Oil surged to near $82 a barrel, extending late gains from the previous session, supported by fresh storm worries, strength in global equity markets and buying by financial investors.
Gold gained in other markets also, with the benchmark August 2008 gold futures in Tokyo closing up 6 yen or 0.2 percent at 2,737 yen per gram. The most-active December gold contract on the COMEX division of the New York Mercantile Exchange rose $1.5 an ounce to $736.90.
"Partly the market is technically a little bit overbought. Also, people are realising that the new year of the central bank agreement is about to start and no one wants to get caught buying metal at the top of the market," said Simon Weeks, director of precious metals at ScotiaMocatta.
"Having said that, though, there are enough issues out there to suggest that gold is ultimately going to go higher." In other metals, platinum matched Wednesday's 10-month high of $1,348/1,352, against $1,343.20/1,350.20 an ounce in New York late on Wednesday.
UBS Investment Bank raised its short-term forecast on platinum, used in jewellery and auto catalyst, noting that Chinese demand for platinum has been very strong amid firm jewellery demand. Silver rose to $13.44/13.49 an ounce from $13.35/13.40 in New York. Palladium was at $341/345 an ounce, versus $339.45/343.45.
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