Tokyo gold futures closed at a one-month high as firm fundamentals spurred bargain hunting after prices slipped in technical selling in the day. The benchmark TOCOM gold contract closed up 15 yen per gram on the Tokyo Commodity Exchange, or about 0.7 percent, at 2,328 yen, after climbing as high as 2,331 yen, the highest since June 6.
Strong oil prices and other fundamentals helped fuel a recovery late in the afternoon session after the June contract slipped as low as 2,298 yen on profit taking following a surge of nearly 6 percent in the last week.
"I think some bargain hunting set in," a Tokyo broker said. Market participants were also wary of moving much either way with the New York gold futures market closed on Monday and Tuesday for the Independence Day holiday.
The decline was anticipated by some after last week's rally. "We really can't say whether the market has peaked out when US players are not there, but it's about time to see some corrective selling," said Akira Doi, director at Daiichi Commodities Co Ltd.
The contract rose by its daily 60-yen limit on Monday, rallying for the second session after falling to a low of 2,203 yen last on Thursday. Spot gold was at $620.25/621.25 an ounce, compared with $622.20/623.20 late in London on Monday, when it gained more than 2 percent to hit a high of $625.05.
Activity in the spot gold market was thin with US markets closed. Spot gold fell as investors and speculators booked profits after pushing the price to it's highest in nearly four weeks around $625.
"We've confirmed that gold was very well-supported below $600.
Gains above $610 were a bit too fast and a bit overdone, but I don't think the price will fall sharply towards $550 or $560 in the short term," Doi said. Traders were also wary of pushing up prices ahead of US payroll figures for June, which are due out on Friday.
Metals traders will be looking at the jobs figures to gauge whether the Federal Reserve is likely to pause in its two-year campaign of interest rate rises. Although the dollar recovered from its lows the previous day, the underlying trend remained bearish.
A falling dollar tends to promote buying in dollar-based gold by investors holding foreign cash. Gold also gained support from bullish oil prices, as investors were keen to shift back their funds into the metal from the start of the third quarter, as gold is often used as a hedge against inflation.
The fundamental trend for gold stayed bullish, but key June TOCOM gold faces technical resistance at the 50-day moving average (MA) around 2,342 yen.
Traders said the latest upswing in key TOCOM gold could gain momentum should it break through that resistance, although plenty of retail investors, who have built up long positions from around 2,100 yen, were looking to sell around that chart point.
For spot gold, the 50-day MA is around $635. Elsewhere, key TOCOM platinum futures closed at 4,496 yen, down 23 yen, or about 0.5 percent from Monday's close of 4,519 yen.
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