Gold steadied on Tuesday below an 11-month high, but analysts said the metal had potential to test $700 an ounce in the coming weeks on a weaker dollar outlook and firm oil prices. Gold was at $688.80/689.30 by 1407 GMT after falling to $685.20 an ounce in Asia, against $688.90/689.40 in New York on Monday, when it matched Friday's 11-month high of $693.60.
"The market is just building a base around here, trying to gain some strength for the next move higher and break $700, but definitely we would need some catalyst," Frederic Panizzutti, metals analyst at MKS Finance, said.
"The market remains positive and bullish, but we would just need some signal to move higher. And definitely we expect this to come from the dollar," he added.
The dollar slipped after US data on housing and consumer confidence came in softer than expected. Gold often moves in the opposite direction of the dollar and is generally seen as a hedge against oil-led inflation. Oil prices climbed further above $68 a barrel as traders eyed the possibility of further disruptions to Nigerian oil output after election results.
"...we are nervous of adding to long gold positions when speculators hold large positions on the US futures market, as is currently the case. But there are signs of good support on dips from the physical market," said John Reade, head of metals strategy at UBS Investment Bank.
"We sold a reasonable amount of gold to India yesterday and our traders report very strong buying interest in Asia and early London trading," he said in a daily research note. Traders said the market was expected to be choppy ahead of the expiry of COMEX May gold and silver options on Wednesday.
Platinum rose as high as $1,327 an ounce before falling to $1,315/1,320, the level at which it closed in New York on Monday, when it matched Friday's five-month high of $1,330 ahead of the launch of exchange-traded funds (ETFs).
"The ETF story adds a significant weight to justifications for those people wanting to go long in those metals," said Darren Heathcote of Investec Australia. ETF Securities launched physically backed ETFs based on platinum, palladium, gold and silver in London on Tuesday. This follows Zurich Cantonal Bank's plans to launch ETFs in platinum, palladium and silver by May 10. Silver was last quoted at $13.92/13.97 an ounce, versus $13.90/13.95 in the US market, while palladium fell $1 to $379/384 an ounce.