Tokyo gold futures jumped to a three-week high on Thursday as the strength in dollar-based gold prices spurred short covering, helping to lift the benchmark contract above the key 2,400-yen level.
The benchmark most-distant June gold contract on the Tokyo Commodity Exchange finished up 46 yen per gram, or 1.9 percent, at 2,437 yen, the highest level since July 20. It moved between 2,422 yen and 2,439 yen.
Other months rose to close up by 40-45 yen. One trader said news of arrests and heightened airport security in Britain on Thursday, which coincides with high international tension over the war in Lebanon, may have lured some safe-haven buying and helped lift gold prices.
British police said they had thwarted a plot to blow up aircraft in mid-flight between Britain and the United States and that they also arrested a number of people. "I think that news may have had some influence on the market," the trader said.
He added, however, that the current market was unlikely to stray far from recent ranges due to an absence of fresh factors. "Even news of the fighting in Lebanon hasn't helped lift gold from above current range trade, and I don't see prices moving very far from recent levels for now," he said.
Many traders see the recent range trade as a temporary lull, however, and believe the market's bull trend remains intact. Although TOCOM gold has fallen about 5-6 percent from the years high of 2,587 yen marked in mid-May, it still remains well above the year's trough of 1,967 yen marked in January.
Total gold turnover on TOCOM was estimated at healthy 121,513 lots, up from Wednesday's 110,895 lots. In the spot market, gold was fetching $651.50/$653.00 an ounce at TOCOM's closing bell, compared with $649.50/$651.00 last quoted in New York.
Some dealers said gold was expected to trade in a range of $635 to $670 in the next few days, with war in the Middle East and strong crude oil prices elevating the metal's safe-haven appeal. Comex gold and silver futures both rallied on Wednesday, closing with strong gains as the dollar weakened following the Federal Reserve's decision to keep US interest rates steady while oil jumped on a drop in energy inventories.
December delivery gold closed up $4.70 at $662.0 an ounce at the New York Mercantile Exchange's Comex division. In the currency market, the dollar was fetching 115.04/115.09 yen, against 115.30/115.33 yen in late New York trade.
Other TOCOM precious metals contracts also rose, with some silver contracts rising by their daily limit of 18 yen. June TOCOM silver was at 462.8 yen per 10 grams, up by the 18-yen trade limit. Spot silver was at $12.57/$12.67 an ounce versus $12.54/$12.59 in New York.
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