Gold climbed to a four-week high on Wednesday as geopolitical jitters in the Middle East boosted safe-haven buying, while strong oil prices lent support. Spot gold rose one percent to $669.50, the highest since March 1, before easing to $666.60/667.10 an ounce by 1443 GMT.
It closed at $662.90/663.90 in New York on late on Tuesday. "The eyes are on the Middle East now, on Iran and what that is going to do to the energy complex," said Tom Kendall, metals analyst at Mitsubishi. "Oil is quite strong this week and it has been helpful with gold's rally," he said.
Oil prices surged to $68.09 a barrel, their highest since September 6, on a rumour of conflict between the United States and Iran, which was quickly dismissed by Washington. Prices hovered near $65, with traders still rattled by the spike.
"We believe gold is likely to continue taking direction from the dollar and oil prices in the forthcoming sessions and further upward momentum should continue to be supported by geopolitical tensions," said Costanza Jacazio, metals analyst at Barclays Capital.
Iran, the world's fourth-largest crude exporter, has been under mounting pressure to abandon its nuclear programme, and tensions ratcheted up on Friday when Iranian forces captured 15 British sailors and marines. Higher oil prices, reviving inflationary worries, prompt risk-averse investors to turn to safe-haven assets, boosting the appeal of gold.
"The fundamental drivers and the status as a safe haven should be supportive for gold and might lead to a test of resistance at $667 to $670," Dresdner Kleinwort said in a note.
The dollar fell against the euro and the yen, after US data on durable goods for February came in lower-than-expected. The currency extended losses after US Federal Reserve Chairman Ben Bernanke said uncertainty about the economy had increased.
In other metals, silver rose to $13.39/13.42 an ounce from $13.25/13.28 in New York. Platinum hit a 4-week high of $1,248.50 an ounce before easing to $1,246/1,251 an ounce from $1,232/1,237. Palladium rose $2 to $352/357.
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