Tokyo gold futures rebounded from losses on Monday as the yen's steep falls, the recent strength in oil prices and strong dollar-based prices led to short-covering by funds and retail investors on dips.
Strong technical signals also encouraged buying after the benchmark Tokyo Commodity Exchange gold contract found firm support around 2,100 yen per gram in the last week.
"The sentiment for the market looks good, especially after seeing (gold) supported around 2,100 yen, but the market lacks the energy to chase prices on rallies," said Takashi Ogura, a risk management section manager at Kanetsu Asset Management.
"There are plenty of investors seeking bargain-hunting chances as many market players believe the long term trend is bullish," Ogura said. The benchmark most-distant TOCOM gold futures contract for February 2007 delivery closed at 2,164 yen, up 1 yen or 0.05 percent from Friday's close.
It had moved in a range of 2,144 to 2,169 yen. Other contracts closed up by 3 to 16 yen. February TOCOM gold held above its major short- and medium-term moving averages, convincing many traders to buy back the yellow metal on price dips.
TOCOM gold closed above its 30-day moving average of 2,143 yen, while its topside was blocked at recent highs of around 2,170 yen, technical analysts said. Yen-based TOCOM gold gathered support as the Japanese currency fell sharply against the dollar in Asia trading.
The yen was trading around 117 against the dollar after falling a full yen on the day to as low as 117.15. A weaker yen has the effect of raising the value of yen-based commodity prices. Firm dollar-based spot precious metals and oil prices also induced buying of TOCOM gold. Spot gold was quoted at $567.00/567.75 an ounce against $564.90/565.80 in New York. It had reached a three-week high of $570.50 on Friday. Gold has been receiving support from the high-flying silver price, which is near its highest level in more than 22 years.
Spot silver stayed strong amid speculation that US regulators would soon approve a silver-backed exchange-traded fund (ETF). EFTA's are designed to reflect closely the price of an underlying market or commodity, such as a stock index or gold prices, and they trade like listed stocks on any exchange.
Dealers pegged key support at $10 for silver, which is used in jewellery, photography and, electronics. TOCOM silver rallied to a three-week high, although traders were looking at yen-based gold prices to determine the market direction.
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