Gold prices rose to a four-week high and platinum hit a three-month peak on Wednesday despite firmer dollar and weaker oil, and analysts said the metals had the potential to post strong gains. Silver moved towards $13.22 an ounce, its strongest for more than three months reached on Tuesday, while palladium recorded a new three-month high.
"If the dollar continues to strengthen, you could see the gold price dipping down to the $630s (an ounce) or around there, but fundamentally I am still fairly friendly towards the metal," said a precious metals trader in London. "If it holds at these levels a bit longer, you will see some physical demand coming in," he added.
Spot gold rose as high as $640.25 an ounce and was quoted at $638.10/639.10 by 1439 GMT, against $638.20/639.20 late in New York on Tuesday. Gold often moves in the opposite direction to the dollar, while the metal is generally seen as a hedge against inflation.
"I am expecting September to remain busy. I don't think people are going to go and do one trade and then forget about it for the rest of the year," said David Holmes, director of precious metals sales at Dresdner Kleinwort Investment Bank.
UBS Investment Bank lifted its short-term price forecast to $650 in one month from $630, while it saw gold at $690 in three months, against a previous forecast of $680. "The current momentum for gold would favour a move higher," Standard Bank said in a daily note, adding the metal might target $645 in the near term.
Analysts noted about 1.8 tonnes of gold sales by European central banks in the week ended September 1, bringing total sales so far under the second year of the European Central Bank Gold Agreement to around 340 tonnes.
Platinum rose to its highest since May 31 at $1,270/1,275 an ounce from $1,268/1,272 in the US market. Some dealers said platinum's bullish technicals as well as the end of mid-year holidays had spurred new buying from speculators and retail investors.
Jewellery makers in China and Japan were also in the cash market to build up stocks ahead of the holiday season later this year, dealers said, adding platinum was poised for more gains.
Platinum, used mainly in jewellery and to clean car exhaust fumes, hit a record high of $1,336 an ounce in mid-May. Silver was at $13.17/13.24 an ounce, from New York's $12.89/12.96 on Tuesday, when it climbed to $13.22, the highest since May 30. Speculators have been betting on silver on hopes a new exchange-traded fund launched on the American Stock Exchange in April would attract more investment and reduce supply. Palladium climbed to a three-month high of $353/358 an ounce, versus $348/353 in the US market.
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