Gold climbed to its highest level in nearly three weeks on Monday and silver hit a five-week peak, helped by a drop in the dollar against the euro and firmer oil. But the metals were expected to hover in their familiar trading range in the near term in absence of clearer market triggers, analysts said.
Spot gold rose as high as $672.35 and was quoted at $671.70/672.20 an ounce by 1427 GMT, against $670.10/671.60 in New York late on Friday, when it rose more than $10. The metal had fallen to a nine-week low of $651.30 on May 24.
"The market is very well supported here and we are trading in a higher band," said Frederic Panizzutti, precious metals analyst at MKS Finance.
"The dollar is surely one factor, but mainly the support is a self-motivating trend as we started to move away from $650. The market was waiting for a bounce back when the buying started in mid-$650s, and some considered that this might be the right entry level."
The dollar declined broadly as the US currency failed to extend gains after last week's robust jobs data, while demand for currencies linked to rising interest rates strengthened. A weaker dollar makes gold cheaper for holders of other currencies and lifts bullion demand.
"The future path of the dollar coupled with oil prices, central bank selling and geopolitical developments are likely to remain as the key drivers in influencing market sentiment and in turn gold prices over the next few months," said Suki Copper, precious metals analyst at Barclays Capital.
The European central bank said on Friday it had sold 37 tonnes of gold from its reserves over the past two months and had no plans for further sales in the current year of the central bank gold agreement.
Analysts said other European central banks had been selling gold. Spain sold 40 tonnes each in March and April and figures are awaited for gold sales in May. Analysts said the market did not react to a sharp drop in Chinese stocks, but any further weakness might influence prices.
"Looking ahead, China is very much back on investors' watch lists today following a near 8 percent decline in equity markets today and a lot of noise about likely government moves to slow property markets," UBS Investment Bank said in a daily note.
"Metals markets, in line with most other risk assets, appear to have shrugged off these developments for now but we wonder how long investors' irrational equanimity will continue if Chinese shares post sequential large declines."
But gold was expected to trade in a range in the near term. "You don't have a lot of really bearish news and you also don't have a lot of bullish news. I would be surprised if we broke out of a trading range of $660-$680 in the next few days," said Michael Widmer, director of metals research at Calyon Corporate and Investment Bank.
In other precious metals, silver rose as high as $13.79 an ounce before easing to $13.74/13.79, against $13.67/13.70 in New York. Platinum rose to $1,296/1,300 an ounce, the highest since May 24, compared with $1,288/1,293 in the US market. Palladium was flat at New York's $369/373 an ounce after rising as high as to $372.
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