Jewellery consumers, undeterred by gold's rise to a 16-year high, are making last-minute purchases this week before religious festivals begin in main buying countries such as India and Indonesia, traders said. Gold rose to $435 an on ounce on Monday, the metal's highest level since August 1988, after the dollar fell to a record low against the euro. Profit-taking has erased some of the gains, but dealers said the rally may not be over.
"It's pretty busy around here. People are buying gold before they are heading back home, where they would want to show off their jewellery," said one bullion trader in Jakarta.
"A stronger rupiah helps offset gold's uptrend. But I would expect some sell-back two weeks from now," he said.
By 0523 GMT, spot gold was slightly below New York's last quoted levels at $432.25/433.00. Dealers said gold had likely only paused before an expected move toward near-term resistance of $440 an ounce, aided by a weak dollar.
Indonesians are beginning to return to their hometown by the millions ahead of a one-week holiday next week to celebrate Eid-ul-Fitr.
November is a busy month not only for Indonesia, which is Southeast Asia's main gold consumer, but also for neighbouring Malaysia and Singapore, where another main festival is due to begin this week.
The Hindu Diwali celebration normally boosts gold consumption among the Indian communities in both countries.
In India, purchases continued ahead of Diwali even though many consumers were not happy about the high prices.
Gold's main commercial use is in jewellery and trinkets, which in countries such as India, the biggest consumer of the yellow metal, may go into dowry chests or into safe-keeping as treasure.
Amit Gupta, a bullion dealer in New Delhi, said gold could eventually rise to near $440 on the back of a firm euro, which makes dollar-priced gold a bargain for non-US investors.
"There can also be a jump to $445 maximum. But I think there will be a correction" after that if it gets that high, he said.
In Hong Kong, a key bullion trading city in East Asia, gold bars were 30 US cents an ounce below London prices, down from 20 cents last week as investors cashed in recent gold gains.
But dealers said sales from mainland China and other investors in Hong Kong were limited.
"People are expecting the gold market to go higher. So, some of the selling from China was held off," said Ellison Chu, a senior manager at Standard Bank London in Hong Kong.
Gold bars were on par to a premium of 10 US cents to London prices in Singapore, the entry point for much of the bullion trading in Southeast Asia, due to some festive buying.
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