Gold gains in London

Gold drifted higher in cautious trading on Friday, helped by a weaker dollar, but remained vulnerable as worries about credit market turmoil persisted, analysts said. Gold rose as high as $662.65 an ounce and was at $661.10/661.90 by 1442 GMT, against $659.20/660.00 in New York late on Thursday, when it rose to a one-week high of $665.05.
"People are nervous and not sure how gold is going to react. It depends so much on the outside market. If the credit problems ease and back to normal then gold might start gaining towards $670-$675," said Matthew Turner, analyst at Virtual Metals.
If there was a heavy sell-off in the stock market, gold also might fall sharply, he said, adding the metal was expected to track the equities markets and the dollar closely.
The dollar fell against the euro, making dollar-priced gold cheaper for holders of other currencies and lifting demand. US and European shares gained, after data showed sales of new US homes unexpectedly rose in July.
Even though gold is traditionally seen as a safe-haven in times of turmoil, it has been behaving much like other assets recently and tumbled when fears of a global liquidity crisis ignited a broad sell-off in financial markets last week.
Problems in the US housing sector, stemming from the advancing of home loans to people with poor credit history, have spread to global credit markets, sparking fears of a liquidity crunch. Gold hit a seven-week low of $641.10 last Thursday as investors sold gold and other precious metals for cash to cover margin calls on losses triggered by a meltdown in the US subprime mortgage market.
"Gold is still stuck between the 100- and 200-day moving averages but overall, I think we eventually trade higher. In the absence of anything else, gold has been following equities but I don't think that this is a long-term correlation," a precious metals dealer in London, said.
The metal's 100-day moving average, a technical tool, stood at $666.06, while the 200-day average was at $655.33 on Friday. "For the coming week, we expect the trading range to remain between $652 and $668 an ounce. Even if things start looking up, getting to levels above the important chart point of $680 an ounce is very unlikely," Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Germany's Heraeus, said in a report.
In other metals, platinum fell to $1,235.50/1,242.50 an ounce from $1,238.30/1,245.30 in New York, while palladium fell to $321.50/324.50 an ounce from $324/327. Silver was at $11.66/11.70 an ounce, versus $11.69/11.72.