Spot gold extended gains to fresh 6-1/2 month highs in Asia on Thursday as the dollar's fall against the yen and firm oil prices prompted fund operators to shift their portfolios back to the precious metals market.
Brighter technical trends after bullion rose decisively above $420 per ounce attracted fresh investor money into the yellow metal, traders said. "The dollar's fall is the main factor which is drawing fresh bids in gold.
Recent falls on Wall Street are also making gold and other precious metals attractive to hedge funds," said a senior manager at a Japanese trading house. Spot gold was quoted at $424.70/425.40 per ounce, up from the late US level of $423.20/3.90 on Wednesday.
It hit a bid high of $425.40. On Wednesday, bullion hit a 6-1/2-month peak of $425.15 amid a sliding dollar and rising oil prices. The dollar struggled as a rebound in oil prices aggravated worries about the US economic outlook and its yawning current account deficit, currency dealers said.
The dollar has lost about 3 percent against the yen, falling from 111.27 yen in less than two weeks, while the greenback has dropped about 2.5 percent against the euro since late August.
Traders said upward momentum in gold could increase if it makes a decisive break above $428. Hedge funds were parking their money in gold and other precious metals as an alternative to base metals prices, which were fragile after last week's plunges, and amid bearish stock prices.
On Wednesday, the blue-chip Dow Jones industrial average closed down 0.11 percent at 9,886.93. The average has ended below the closely watched level of 10,000 for five consecutive sessions. Some traders said, however, it would be too risky to expand positions in precious metals too heavily ahead of the US presidential election.
"As long as oil prices are high, gold will be strong, but it might be a bit dangerous to go overly long ahead of the election," said Hiroyuki Kikukawa, associate director at Nihon Unicom's research department.
Prices of other precious metals gained in line with gold, traders said. Silver was quoted at $7.30/$7.32 an ounce from $7.14/7.17 in New York. Platinum was at $851/$856 an ounce, compared with $846.00/850.00 in New York.
Sister metal palladium was at $215/$220 an ounce from $214.00/218.00.