Gold held above $685 an ounce on Thursday on the back of a weaker US dollar, but some dealers turned cautious after the metal's failed attempts to revisit $700. "The metal's failure to decisively break the key resistance's has knocked off the bullish sentiments, albeit marginally," said Pradeep Uni, analyst at Vision Commodity Services in Dubai.
"The rally is clearly running out of steam, and as far as things stand the market probably needs stronger motivating factors to scythe the psychologically important level of $700, which has of late become more of a level of self esteem for the bulls."
Spot gold rose to $685.30/685.80 an ounce, from $684.50/685.00 late in New York on Wednesday when higher crude oil spurred some buying. US crude futures were little changed on Thursday after rising more than a dollar the previous day, with political issues related to key oil producers Iran and Nigeria lending support to the market.
Gold rose to an 11-month high of $693.60 on Monday, matching the level hit on Friday. Dealers said the market needs to crack the next resistance of $695 to regain $700 a level last seen in May 2006.
The new benchmark gold futures contract for April 2008 delivery on the Tokyo Commodity Exchange rose 9 yen per gram to 2,642 yen. The dollar was within sight of its record low against the euro after mixed US data did little to allay market concerns about a slowdown in the US economy.
The euro was at $1.3636, steady from late US trading on Wednesday, when it had climbed as high as $1.3667 just shy of the currency's all-time peak at $1.3670. Invested Australia was more optimistic on gold. "Gold looks fairly well supported at current levels with strong physical buying emerging over the past few days," it said in a daily report, adding that bullish comments from a Chinese central bank official also supported gold.
China should put its $1.202 trillion in foreign exchange reserves to better use by ploughing more money into gold, oil and metals, Xiwang Jumbo, a deputy governor of the People's Bank of China, said in remarks published on Wednesday.
Chinese officials, including Premier Wen Jerboa, have said the country would explore more channels to invest its rapidly expanding foreign exchange reserves, the world's largest stockpile, to improve yields and diversify risks.
China is the world's 10th-largest holder of gold, according to the World Gold Council, holding 600 tonnes. In other precious metals, silver edged up to $13.79/13.84 an ounce from $13.78/13.83 late in New York. Platinum rose to $1,306/1,311 an ounce from $1,298/1,303 an ounce. Palladium dropped to $377/382 an ounce from $378/383 late in New York.
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