Gold rises in London

Gold gained on Monday with a drop in the dollar and recovery in stocks, but investors remained cautious as they digested the US federal reserve's surprise move to slash the rate it charges banks on loans.
Bullion investors kept a close eye on external markets, as gold, traditionally seen as a safe-haven investment, behaved much like other financial assets in recent months because of the growing role of commodities in diversified portfolios.
"You could argue that after the euphoria with the Fed action, the market is beginning to think: Is that enough," said Stephen Briggs, economist, SG Corporate and Investment Banking.
"Gold is not acting as a safe-haven. It is acting arguably as a source of funds to cover losses in other markets, but it's very much dependent on other markets. And all of them look volatile, so I think gold is also going to be volatile."
Spot gold fell as low as $650 an ounce before rising to an intra-day high of $660.20. It was at $659.70/660.20 by 1421 GMT, against $655.30/655.90 late in New York on Friday, when it gained nearly $5. Gold has risen three percent since falling to a 7-week low of $641.10 on Thursday.
"We are still expecting a nervous market. When the pressure comes back on the stocks, we also expect pressure on gold," said Michael Kempinski, senior metals trader at Commerzbank. Investors boosted stocks and moved cautiously back into other riskier assets as immediate fears of a credit crunch waned following the Fed's confidence-building move last week.
European stocks rose more than 1 percent, adding to a 2.3 percent gain on Friday. Asian equities soared earlier, with Japan's Nikkei average recording its biggest one-day gain for 13 months. US stocks were little changed as investors weighed the likelihood of more Fed action.
The Fed turned near-panicky financial markets around on Friday by cutting a key bank lending rate in a move designed to push liquidity into the banking system and to calm market jitters. Markets have been battered by fears of financial instability after trouble with risky US mortgages. Gold was also helped by a weaker dollar against the euro, making bullion cheaper for other currency holders, dealers said.
"Gold is not yet out of the woods despite the Fed's cut of the discount rate and extension of duration of borrowing at the discount window," Dresdner Kleinwort said in a report. "The price of crude oil is probably a burden for gold. As hurricane Dean is moving south and likely not to hit the oil facilities in the Gulf of Mexico, the price of crude oil is falling."
Analysts said gold held by exchange-traded funds remained near record highs, suggesting longer-term investors were comfortable with the metal. US-based StreetTRACKS Gold Shares, the world's largest gold-backed exchange-traded fund (ETF), held record high gold at 510.21 tonnes last week. "We like to own gold and platinum here but would avoid silver and palladium. Positioning in gold and platinum is greatly reduced and physical demand is and will be supportive," said John Reade, metals analyst at UBS Investment Bank.
Platinum rose to $1,243.60/1,250.60 an ounce from $1,230.40/1,237.40 in New York. Silver edged up to $11.88/11.93 from $11.69/12.72 an ounce. It tumbled to its lowest since October 2006 at $11.03 last Thursday. Palladium rose to $328/332 from $325.75/329.75.