Gold climbed about one percent in Europe on Thursday, helped by funds buying and a weakness in the US currency against the euro, dealers said. The market was quiet in the morning session and traded in a narrow range, partially because of Chinese, Jewish and Islamic holidays, but it rose in the afternoon.
Spot gold traded at $471.20/471.90 a troy ounce by 1508 GMT, up from $466.00/466.70 last quoted in New York on Wednesday. It has risen by nearly 6 percent in a month, off from a near-18-year peak of $475 on September 22.
"Funds are just running and buying," said a precious metals trader in London. "Every time the market dips, more investment interest comes in."
The dollar fell against the euro in technically driven trading as investors who had bet against the euro zone currency were forced to buy it to cut their losses as it rallied.
Gold has not strictly tracked the dollar in recent weeks but it has broken from inverse link to the currency, as factors like worries about inflation and geopolitical events and market technicals have moved to the forefront.
A weak dollar generally makes dollar-priced gold cheaper for holders of other currencies and lifts demand.
Traders said a drop in crude oil prices would put some pressure on the metal, as inflation worries had eased to some extent. Gold is often seen as a hedge against inflation.
Oil slid to its lowest level in two months on Thursday as US drivers finally eased off the gas and the world's energy watchdog said there was no pressing need to dip further into emergency fuel reserves.
"We do not rule out the possibility of another spike higher in the short term, but believe profit-taking will bring prices lower over the medium term," Barclays Capital said in a report.
Prudential Equity Group raised its gold price forecasts for the fourth quarter and for 2006 due to emerging inflation concerns, recent bomb attacks and global conflicts, and the looming US budget deficit, a company analyst said on Thursday.
The company also boosted its earnings-per-share estimates for miners AngloGold Ashanti Ltd, Barrick Gold Corp, Freeport-McMoRan Copper & Gold Inc, Goldcorp Inc, Newmont Mining Corp and Placer Dome Inc for 2005, 2006 and, in most cases, 2007.
Prudential increased its gold forecast for the fourth quarter of 2005 to $470 an ounce, from a prior estimate of $425, and upped its 2006 view to $438 an ounce, from $400 previously, Prudential's John Tumazos said in a research note.
Dealers said any dips in prices would be seen as good buying opportunities by physical traders, mainly in India.
Gold consumption in India, the world's largest gold consumers, is expected to surge nearly 33 percent in 2005 to 850 tonnes because of higher incomes and good farm output, the World Gold Council said.
Consumption, excluding recycled gold, rose 57 percent to 508 tonnes in the first half of the year, from 322 tonnes during the year-ago period, Sanjeev Agarwal, the council's managing director for the Indian subcontinent told Reuters.
Dealers also await US non-farm payrolls data on Friday for direction. Economists expect the figure to be down 129,000 in September, against a rise of 169,000 in August.
Gold had been consolidating after investment funds boosted the net long position in New York to a record high last week, raising concerns about a sell-off, traders said.
Silver was at $7.50/7.53 versus $7.41/7.44, while platinum rose to $920/924 from $915/918 last quoted in New York. Palladium edged up to $192/195 from $191/194.