Gold was little changed on Tuesday but stayed within sight of a one-week high hit the previous day, while Tokyo futures shrugged off a weak yen and dropped on profit taking. Spot gold hit an intrude high of $657.10 before slipping to $656.60/658.10 an ounce, steady from $656.40/657.90 an ounce late in New York on Monday.
Trading was subdued, with Hong Kong on holiday and dealers unsure whether on Monday's gains were sustainable. The trading range could be as wide as $645 to $670 in coming weeks, they said.
"Though there is a high likelihood of a bullish ascent in the short term, the signals aren't categorically strong enough to discern a major trend in the market," said Pradeep Unni, an analyst at Vision Commodity Services in Dubai. Gold rose to its highest level in a week at $659.05 an ounce on Monday on dollar weakness, tensions in the Middle East and strong oil.
"Hence, expect gold at the least to oscillate in its predefined range for an extended time period, and it is likely that gold may fail to see higher levels sustainable," said Unni, who pegged key support at $655.
Key April 2008 gold futures on the Tokyo Commodity Exchange ended 12 yen a gram lower at 2,631 yen, having risen to its highest in more than a week to 2,644 yen on Monday.
Cash gold, which often offers leads to Tokyo futures, has struggled to regain $700, a level last seen in May 2006. It rallied to an 11-month high of $693.60 in late April but other attempts to approach $700 were met by profit taking.
"Firmer oil prices and the dollar's slight falls against the euro encouraged buying to push up gold above $655, but the market would need more news to advance further," said Akira Doi, director at Daiichi Commodities Co Ltd.
"Gold will be under pressure as investment funds will be keen to lock in their profits ahead of the end of the second quarter," said Do, adding that net short positions were increasing in the market.
Stop-loss short covering could be triggered should gold extend gains beyond $660 and $665, he added. Gold rallied to its highest level in 26 years at $730 in May 2006 as investors diversified their portfolios on Middle East tensions, record-high oil prices that raised fears of inflation as well as uncertainties in the US dollar's outlook.
It hit a record high of $850 an ounce in 1980. "There's some light buying but in general, there's not much going on. The summer break is coming and I think the market will trade in range at the moment," said a dealer in Singapore.
In the currency market, the yen hit a record low versus the euro and was within sighting of a 4-1/2-year against on viewing that Japanese interest rate rises will be outpaced by those of other central banks.
The euro rose to a record high of 166.10 yen on electronic trading platform EBS before slipping. The dollar was steady at 123.56 yen, staying near 123.76 yen, its 4-1/2 year high hit on Monday.
Silver inched up to $13.22/13.26 an ounce from $13.21/13.25 late in New York. Platinum rose to $1,291/1,296 an ounce from $1,290/1,294 an ounce. Palladium dipped to $367/372 an ounce from $369/372 an ounce.
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