Gold extended gains on Tuesday as the dollar weakened against a basket of currencies, boosting interest in the precious metal as an alternative asset. Spot gold was bid at $948.00 an ounce at 1440 GMT, against $941.40 an ounce late in New York on Monday. US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $5.70 to $949.40 an ounce.
The precious metal climbed as the dollar slipped against a basket of six major currencies after data showed prices of US single family homes rose for a second consecutive month in June and consumer confidence rose more than expected in August. "Gold was swept down rather brutally yesterday afternoon for no good reason, and it has picked up quite nicely this afternoon on the back of the turnaround in the dollar," said Mitsubishi Corp precious metals strategist Tom Kendall.
The dollar was also knocked by a recovery in equity markets, as Ben Bernanke's reappointment as Federal Reserve chairman was seen as likely to encourage investors to take on riskier trades. Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, were steady after inching up on Friday. Among other precious metals, palladium prices rose to their highest level in nearly a year as hopes for an improvement in the balance of supply and demand and gains in gold boosted interest in the autocatalyst material.
"People are looking at ways to leverage off the expected turnaround in the auto industry," said Kendall. "As sales pick up, they are looking for palladium to be the chief beneficiary, as opposed to platinum, with the substitution story continuing." Spot palladium was at $285.75 an ounce against $279.50, having earlier touched a high of $287.25, its firmest since early September last year.
South Africa's biggest union said on Tuesday a ballot of workers at platinum producer Impala Platinum showed a split over whether to accept an improved wage offer to avert a strike. Some members are already on strike at the company's biggest mine over the wage dispute, the union said.
South Africa produces four-fifths of the world's platinum. "If Impala and the NUM come to terms on a new contract, some risk premium in the market may be removed and platinum prices could fall further," HSBC analyst Jim Steel said in a note. Platinum rose to $1,233.50 from $1,236.50 an ounce, while silver was at $14.28 an ounce against $14.13.
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