Japanese gold futures advanced to a fresh one-month high above 2,600 yen a gram on Tuesday as healthy Technicals and surges in industrial metal prices, including copper, prompted active buying by investment funds.
Buying of Tokyo Commodity Exchange gold futures accelerated in afternoon trade as investors focused on sharp gains in base metals as a key factor to buy yen-based gold and other precious metals, traders said.
Benchmark TOCOM gold for February 2008 delivery rose as high as 2,612 yen the highest since March 1 before closing the day at 2,611 yen, up 17 yen or 0.7 percent from Monday. "The surge in non-ferrous metals was the main reason to encourage buying in gold in the afternoon," said Shoji Sugata, manager at Mitsubishi Corp Futures and Securities Ltd.
"The overall mood in precious metals has been boosted by the strength in copper and others today," he said. London metals futures gained sharply on Tuesday when trade restarted after a four-day holiday weekend, while Shanghai copper futures jumped by their 5 percent daily limit. Benchmark London Metal Exchange copper hit a peak of $7,898.75 a tonne early in the session in electronic dealing, its highest since September 2006, up from $7,350 at the last open outcry on Thursday.
LME nickel and lead both hit record highs and zinc charged nearly 7 percent higher. Shanghai copper futures rose the 5 percent daily limit during on Tuesday's session to 72,400 yuan a tonne, after hitting a 4 percent daily cap on Monday.
Firmness in cash gold also provided additional support to TOCOM precious metals. Cash gold rose on Tuesday on light short covering after the dollar backed off slightly against the yen. Spot gold was quoted at $676.00/676.50 an ounce, against $671.50/672.50 late in New York. London and some European and Asian markets, including Australia, were closed on Monday because of the Easter holiday.
TOCOM gold was supported by the recent weakness of the yen, but traders were careful about taking large positions as they were unsure how the Japanese currency would behave after the G7 meeting which starts on Friday.
The dollar came under broad pressure and slipped from a six-week high against the yen on Tuesday, as investors took profits ahead of the G7 meeting. "Trend in the medium- and long-term is clear strong, but the market lacks clear factors to buy gold heavily from here," said Hisaaki Tasaka, market analyst at Ace Koeki Co Ltd.
"Japanese players are especially nervous about taking new positions above 2,600 yen as they are concerned that the yen could strengthen after the G7 meeting," Tasaka said.
Traders were watching to see if it could break through a chart point of 2,621 yen a level also reached on the same day. A clear break above that would pave the way for the TOCOM gold contract to rise towards this year's high and a 21-year high of 2,702 yen reached on February 26.
Other precious metals strengthened broadly, with TOCOM silver futures up 1.4 percent on the day. "Silver tends to react sensitively when industrial metals are moving sharply," Mitsubishi's Sugata said. Key February TOCOM platinum futures closed up 22 yen or 0.5 percent at 4,749 yen a gram. Speculators were aiming to lift the key contract towards a record high of 4,782 yen hit on February 26.
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