Tokyo gold edges higher

Tokyo gold futures edged higher on Wednesday as a weaker yen helped induce light short-covering on price dips, but they were generally capped as the cash price was held down by weaker energy prices.
Key Tokyo Commodity Exchange gold futures for December delivery closed at 2,445 yen a gram, up 7 yen or about 0.3 percent from Tuesday's close, after moving between 2,442 yen and 2,449 yen.
"Tokyo prices were supported by a weaker yen, but the general mood of the market was not too good as cash gold was extremely capped yesterday in New York," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management. "But gold is not expected to come under strong pressure. It is unlikely to fall sharply below $600."
Gold weakened in Asia on Wednesday after volatile trade in New York, where a firmer dollar and falling crude oil prices triggered selling by investors. As of 0630 GMT, spot gold had edged down to $624.10/625.10 an ounce from $625.20/626.20 in New York late on Tuesday. A stronger dollar against the yen usually pressures gold, which is largely priced in dollars globally, because it becomes costlier in key overseas trading areas, but it could be potentially positive for yen-based prices.
Traders said activity in Tocom precious metals was thin, however, as speculators could be trading more actively in corn and soybean futures on other Japanese exchanges reflecting surges in grain prices in global markets over the past week.
"Precious metals in general are not too popular right now as they lack clear trading factors of their own, so speculators are shifting into the more volatile grain market," Kageyama said.
The benchmark corn contract for January 2008 delivery hit an all-time high of 26,990 yen per tonne on the Tokyo Grain Exchange on Wednesday. As of Tuesday, open interest in Tocom gold futures stood at 231,279 contracts, down nearly 5 percent from 242,444 contracts at the start of the year.
But the technical trend for Tocom gold remained bullish as it was more than 1 percent above the nearest key resistance of 2,414 yen, which is the 14-day moving average. The long-term outlook for gold was also strong, which should limit aggressive selling by investors.
A Reuters poll of 42 analysts from around the world forecast a median price for spot gold of $651.25 in 2007, up 6.4 percent on 2006, due mainly to expectations of dollar weakness. Tocom platinum futures rebounded on short-covering after losing more than 1 percent the previous day. Key December Tocom platinum finished at 4,364 yen a gram, up 27 yen or about 0.6 percent from Tuesday.
On Tuesday, the key contract hit a high of 4,403 yen, the highest for a benchmark contract since November 27. Cash platinum was little changed at $1,136/1,141 an ounce from $1,135/$1,141 in late US trade the previous day.