US gold futures bounced to a one-week high at the close on Tuesday, lifted by trade and speculative buying, after the recent shake-out made the metal cheaper for gold bulls, trading sources said.
December delivery gold advanced $1.90 to $462.30 an ounce on the New York Mercantile Exchange's COMEX division, its highest settlement since last Wednesday, after dealing from $457.70 to $463.80.
Trade and fund buying dominated dealings from the New York open, though technical indicators and uncertainties about the effects of continuing unrest in France on currencies and commodities may have left some dealers somewhat tentative.
Traders said the buying was in response to last week's sell-off by funds that dragged gold to a seven-week low and pared the long exposure on COMEX to a more sustainable level.
"This is just a technical rally here," said one floor trader. "We held support on the downside and now we are extending back up on short covering."
Open interest in COMEX gold is now more than 50,000 contracts below its recent historical highs. Interest as of November 7 fell 2,398 lots to 317,670 lots, COMEX data showed.
Bruce Zaro, technical analyst at Delta Global Advisors, said charts indicated that gold looked more likely to pull back in the short-term, due to the lower highs and lower lows seen during the fall from last month's 18-year highs atop $483.
"These short term negatives have just served to work off overbought conditions for now. The $452 trend-line will likely act as a brick wall and gold should bounce off that... maybe up to the $470 area," Zaro said.
However, if gold managed to break below $452 support, it could possibly target the $434 mark, Zaro added.
Commodity prices were little affected by the dollar's rise to a two-year high against the euro Tuesday, less sensitive to short-term swings in foreign exchange than they were a year ago.
Plus, the dollar is rising because the euro is plagued by rioting in France and uncertainty over Germany's new government as much as by any confidence in the US economy or rising interest rates in the United States.
"The overriding attitude in currencies is uncertainty, which is good for gold and commodities in general," said Jeff Christian, managing director of consultant CPM Group.
December gold hit an 18-year high at $483.10 in October on buying fuelled by growing fears of inflation due to soaring energy prices. Some players feel gold can test the key $500 level before too long, lifted by investment and consumer demand.
Final estimated COMEX gold volume was 56,000 lots, versus Monday's official count of 56,994 contracts.
Spot gold traded at $461.20/462.00 an ounce, against Monday's late quote of $459.10/9.90. London's late fix on Tuesday was at $461.60.
December silver rose 2.0 cents to $7.625 an ounce, trading from $7.54 to $7.68. Spot traded at $7.57/60 an ounce, above $7.56/59 previously. It fixed at $7.5225. NYMEX January platinum gained $8.90 to close at $943.70 an ounce. Spot platinum reached $937/942.
December palladium ended up $3 at $233 an ounce. Spot palladium hit $226/229.