Tokyo gold futures moved in a relatively narrow range on Monday, supported by gains in New York but capped by the yen's recovery against the dollar.
The benchmark April 2007 gold contract on the Tokyo Commodity Exchange ended up one yen per gram at the day's low of 2,386 yen, slipping from a high of 2,407. "The market seems to be consolidating after having confirmed a floor at around 2,370 yen last week," a Tokyo broker said.
Players were also reluctant to trade actively due to market holidays in the United States and Britain.
Last on Tuesday the key contract dived 220 yen or 8.5 percent from a 20-year high of 2,587 yen set on May 11 to a four-week low of 2,367 yen as funds rushed to take profits.
Though trade was subdued on Monday, the market may remain volatile for a while, the broker said. But he added that the longer-term trend of the gold market remains upward backed by bullish fundamentals, geopolitical tension and uncertainty about the US economy and currency.
"This week the market's direction will largely depend on movements of the currency market, as traders brace for a series of key US economic data," he said. Gold traders usually watch currencies to determine the market's direction as gold tends to be viewed as a dollar alternative.
This week is heavy with high-profile US data, including the Institute for Supply Management's manufacturing index on Thursday and the monthly employment report on Friday. Signs of solid economic activity and inflationary pressures could cement market expectations for another interest rate hike by the Federal Reserve in June, boosting the dollar, analysts said.
The dollar's growing yield advantage was the main driving force behind the currency's rally in 2005.
The dollar was at 112.27/31 yen, down from around 112.70 yen in late US trade on Friday. Spot gold was quoted at $646.75/648.25 an ounce, against $650.80/651.60 at Friday's New York close.
Prices corrected lower after surging to a 26-year high of $730 on May 12. The record high was $850, set in January 1980. On Friday, Comex June delivery gold climbed $2.50 to $651 an ounce as currency moves and a security scare at the US Capitol in Washington dominated dealing.
Comex futures spiked on May 12 to $732 an ounce, a high not seen since 1980, but after that a whirlwind of profit-taking dragged it as low as $636 by last on Wednesday. In the platinum market, TOCOM's benchmark April 2007 contract set a new record high at 4,658 yen per gram on Monday on speculative buying.
At the close it was up three yen at 4,616. Market sentiment continued to be strong after a bullish outlook report by the world's top platinum distributor Johnson Matthey this month, although investors were becoming cautious about accumulating long positions at high prices, brokers said.
Spot platinum was quoted at $1,285/1,290 an ounce, against $1,292/1,300 in New York.