Gold was a touch lower in Asia on Wednesday as the dollar rebounded against the euro, but dealers said the metal remained a safe haven amid high oil prices and worries about the US economy.
Spot gold was at $425.60/426.35 an ounce, compared with $426.05/426.80 last quoted in New York and off a six-month peak of $430.20 an ounce on Monday. Some dealers expected a tight $3 range in Asia and Europe with support pegged at $422 an ounce.
The upside was seen at $432, a 16-year high, although a stronger dollar could delay any breach of key resistance at $430 an ounce. The euro was at $1.2748, against $1.2753 in late US trade and off on Tuesday's eight-month peak of $1.2841, making dollar-priced gold less attractive for holders of other currencies.
Currency traders said the Europe's recent rally could continue, with the dollar weighed down by US election uncertainty, low interest rates and a growing current account deficit.
"In this environment, gold as an asset class will probably continue to do well.
The US dollar weakness gives gold price the strength," said Andrew Fay, Asia Pacific chief investment officer for Deutsche Asset Management, which manages $500 million in gold funds.
Many investors were looking past equities, which offer limited returns at the moment, Fay said at a media briefing. "Equity will probably offer just single-digit returns or potentially negative returns," he said.
"Now they are looking at commodities, they are looking at gold, they are looking at specific funds such as biotech funds." In Tokyo gold futures, the benchmark October gold contract was trading at 1,465 yen per gram.
Some dealers said fears about inflation, the state of the Japanese economy and high US oil prices had triggered renewed interest in gold. US light crude oil held firm above $55 a barrel.
"There's financial and economic uncertainties," said Its Toshima, Japan and South Korea regional director of the World Gold Council. Also, "people are buying gold as a portfolio asset of pensions," said Toshima, referring to soaring pension and healthcare costs in Japan.
And Japanese investors have recently been buying gold from major bullion houses in Tokyo "to preserve the value of the assets rather than for short-term speculation," he said.
Dealers said the bullion market would look to US GDP figures due out on Friday, while watching dollar and oil price movements for an idea of where gold will be heading. Traders will also eye the US durable goods report for September due out on Wednesday. Economists' consensus forecast is for a rise of 0.5 percent. Some dealers said gold would advance to test $430 an ounce but a large fund's net long position in New York's Comex market worried the market.
"If for some reason the US dollar starts to rally back up, you can imagine how the funds will take their money back out of gold. That stop-loss selling would have a significant impact," said one dealer in Singapore.
In other precious metals, silver was at $7.29/7.31 an ounce, compared with $7.29/7.32 last quoted in New York. Spot platinum was at $841/845 an ounce, compared with $841/846 last quoted in New York.
Palladium was at $212/217 an ounce, against $212/218 in the US market.
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