Cash gold extended gains on Friday on steady bargain hunting, which, combined with a weak yen - hovering at a 4-1/2 year low against the dollar - also helped lift Tokyo futures.
While some dealers said gold's prospect looked a bit brighter since it recovered from a three-month low of $642.90 hit on Wednesday, others were of the view that the precious metal could come under pressure again. Gold had fallen due to a rising dollar and a rally in US Treasury yields.
Spot gold was fetching $653.00/$653.60 an ounce at 0342 GMT, compared with $651.20/$652.70 last quoted in New York. "Gold is looking a little bit happier at these levels now. We might find we want to test $655 today," said Darren Heathcote of Investec Australia in Sydney.
But investors remained cautious, he said. "We are having a little bit of stability but I think it may take a little while longer for them to gain the confidence to build up their longs again," Heathcote said. Some dealer said the dollar's underlying strength would continue to put pressure on gold.
"Gold rebounded but considering that the euro is now under pressure against the dollar, I don't think gold can rise very strongly from here," said Tetsu Emori, chief strategist at Mitsui Bussan Futures Ltd. He said that there was strong buying interest when gold dips below $650. But technical sentiment will deteriorate should the spot price fall below $635 - a low reached in March.
"Gold's apparent inability to scythe the keenly awaited key resistances only hints of an impending sell off," said Pradeep Unni, an analyst at Vision Commodity Services in Dubai. He was referring to a number of technical barriers, which include $700 an ounce.
"However, this wouldn't be an overnight event. Gold would continue to wobble around the $640 to $685 levels for quite a while before finally sliding." On the Tokyo Commodity Exchange, the benchmark most-distant April gold contract finished the morning up 10 yen per gram or 0.4 percent, at 2,608 yen after hitting a session peak of 2,612 yen, the highest since June 7.
The morning's trough was 2,607 yen. In the currency market, the dollar was boosted by a climb in US Treasury yields to a five-year high this week, while investors renewed their appetite for risk and sold the low-yielding yen in carry trades. The dollar was fetching 123.00/123.04 yen at 0355 GMT, against 122.94/122.97 yen in late New York.
It climbed to 123.13 yen on Thursday, the highest since December 2002. Benchmark April platinum futures contract closed the morning up 5 yen at 5,010 yen. Spot platinum was at $1,279/$1,284, a touch down from New York levels of $1,280/$1,285 an ounce.
April TOCOM silver was at 522.3 yen per 10 grams at the close of the morning session, up 1.4 yen. Spot silver was at $13.14/$13.18 an ounce versus $13.13/$13.17 in New York. April TOCOM palladium finished the morning at 1,468 yen per gram, up 3 yen. Spot palladium inched up to $366/$370 an ounce, compared with $365/$370 in New York.
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