Comex gold rose in volatile trade on Thursday, tracking a recovering euro after the European Central Bank left interest rates steady, despite concern that a rallying currency will hamper a euro-zone economic recovery.
February gold settled up $2.10 at $424.40 an ounce after topping at $426.00. Profit taking on this week's rally to a 15-year high pushed it down to $417.70 overnight with futures seesawing in and out of positive territory all day.
"Gold, which had probably suffered a little bit as a result of the strength of the dollar overnight and also the leftover from the profit taking and position squaring over the last couple of days, obviously found some good support on the euro," said Bernard Hunter, a director at bullion dealer ScotiaMocatta in Toronto.
The safe-haven metal has been trading almost tick for tick with the euro as diversification out of the dollar drove investors into alternative currencies and precious metals.
The euro rose to $1.2779 from Wednesday's close at $1.2631/37, coming within half a cent from Tuesday's lifetime high at $1.2812.
ECB President Jean-Claude Trichet seemed to give a green light to buyers, saying the euro's record-setting rise produced no substantial change in demand for European exports.
"The rate cut expected didn't happen, so the dollar's moving and so are we," said a Comex floor broker. Gold rose to $431.50 on Tuesday, its highest price since 1988, starting the year by extending 2003's 20-percent rally.
The falling dollar has made gold more attractive to foreign currency investors and worries about instability in Iraq and al Qaeda attacks has kept gold in vogue as a safe haven.
Hunter said there was buying from the physical market in India and the Middle east and Asia, on dips. He said the market expected a pullback to $407 or $410, which would not threaten the integrity of the rally.
"Ultimately, though, the raised security levels, fears of a dirty bomb and low interest rates in the US will underpin gold, keeping the metal above $400," wrote James Moore of TheBullionDesk.com.
Spot gold rose to $423.85/4.55 from the close at $421.00/75 on Wednesday. The afternoon fix in London was $421.00 an ounce.
March silver rose 1.0 cent to $6.273 an ounce, trading $6.16 to $6.30. Spot silver was last at $6.22/24, versus $6.23/25 late on Wednesday. The fix was at $6.20. Nymex April platinum rose $9.60 to $846.50 an ounce.
It set a contract high at $848. Spot fetched $851.00/856.00.
March palladium slipped 75 cents to $204.00 an ounce. Spot fetched $197.00/202.00.