Gold snapped back in Europe on Thursday, gaining just over half a percent, as this week's bout of dollar weakness prompted dealers to cover short positions, traders said. Gold was now taking aim for $440 an ounce and possibly June's peak above $443.
By 1448 GMT, spot gold was at $438.80/439.50 a troy ounce, up from New York's late quote on Wednesday at $436.35/437.05 and just off a fresh four-week high at $439.10. "It is all currency driven. There's been quite a lot of short-covering going on over the past couple of days," one trader said.
Others added the quiet August trading conditions could be exaggerating the latest leg up. "There is definitely some fund buying." Gold has seen three failed attempts in 2005 to climb back to a 16-1/2-year peak scored late last year at $456.75.
"The latest move seems to have completely reversed the attitude and the trend of last week and everyone seems to have been caught a bit short," the trader said.
The dollar steadied a little on Thursday as dealers lightened their positions ahead of key US unemployment data on Friday.
By 1435 GMT, the euro was trading around $1.2362, having risen as high as $1.2380 earlier. John Reade, analyst at UBS Investment Bank, said he had revised up his one and three-month forecasts for gold to $445 an ounce.
"There is still more room for speculators to buy gold on the back of a weakening dollar, hence the reason for the increase to our short-term forecasts," Reade said in a report.
Barclays Capital noted the HUI index of unhedged gold companies jumped over five percent on Wednesday thanks to improving sentiment in the gold market. It hit its highest since March on Thursday at 212.30.
The market continued to keep half an eye on a potential strike by gold mineworkers in top producer South Africa.
Platinum took a breather after gaining some four percent over the past seven days. The metal scored a fresh 15-month high at $917 an ounce earlier before retreating to $902.00/908.00, down from New York's $912.00/918.00.
Traders said a break of resistance at $915-920 could open the way to $930, but noted the buying was still driven by speculators with little sign of industrial consumer interest.
Silver slipped to $7.24/7.26 from $7.27/7.30, while palladium dropped to $189.00/193.00 from $193.00/197.00.
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