Tokyo gold futures rallied to a one-week high on Tuesday after a three-day weekend, as short-covering gathered steam due to a weaker yen and North Korea's announcement that it had conducted its first nuclear test.
Benchmark August 2007 gold on the Tokyo Commodity Exchange settled up 45 yen or 2.1 percent at 2,235 yen per gram after trading between 2,225 and 2,245 its highest since October 3.
"Short position holders rushed to buy back TOCOM contracts as geopolitical concerns resurfaced after North Korea's nuclear test announcement," a Tokyo broker said, adding that the market was ripe for short covering after last week's sell-off.
Buying of TOCOM futures accelerated in afternoon as the yen slid to an eight-month low against the dollar amid concern over a possible second nuclear test by North Korea.
The dollar was little changed on the day at 119.10 yen after edging up to an eight-month high of 119.35 yen on electronic trading platform EBS. Gold also drew support from a steady oil market, where prices stayed around $60 a barrel on Tuesday as Opec worked out the details of an expected 1 million barrels per day output cut.
TOCOM gold is expected to recover towards 2,300 yen this week after the benchmark contract confirmed a floor at 2,143 yen last on Thursday, the broker said.
Last week, the key contract dived 8.1 percent from the peak of 2,316 yen to its lowest point since June 21 as investment funds trading in the short term shifted into bullish equity markets.
Spot gold was quoted at $578.00/75 an ounce, up from $576.00/577.10 late in New York on Monday. In the platinum market, the benchmark August 2007 contract closed up 35 yen per gram at 4,032, buoyed by a weaker yen and gains in gold futures. Spot platinum was quoted at $1,079/1,084 an ounce, down from $1,082/1,087 in New York.