Gold rose to its highest in just over three weeks on Monday, as firm oil and base metals prices attracted investors to commodities, analysts and traders said. Platinum hit a one-month peak as traders eyed ongoing wage talks in top producer South Africa.
Fund buying of gold triggered automatic buy orders during the day, although some feared the market may still lack enough traction to make significant further gains as the slower summer period kicks in.
"Base metals are recovering and oil is still firm...people have been running a touch on the short side, so they decided to cover that," one trader said. "But I am still just a little concerned that we might run out of steam round here."
Spot gold was quoted at $661.25/661.85 a troy ounce by 1520 GMT, near the day's peak of $662.80 and up from New York's late traded $653.80/654.60 on Friday.
Prices fell to $645 at the end of last week, before rebounding. They are currently up four percent since the end of last year but well off this year's peak of $693.60 hit in April.
John Reade, metals analyst at UBS Investment Bank, said the bounce off June's low had nevertheless generated confidence. "Returning risk appetite may also be helping gold and silver," he added, noting that oil and base metals prices along with the weaker dollar were all stimulating buying.
Oil prices rose to an 11-month high above $76 a barrel on Monday as rising global demand and North Sea field maintenance exacerbated supply worries. London's brent crude climbed to an intraday high of $76.24 and was last trading up 43 cents at $76.05.
London Metal Exchange traded copper futures rose over 1.5 percent to $7,970 a tonne, having earlier hit a 2-month high at $8,015 following news that miners had gone on strike in the world's biggest copper producing nation Chile. Lead hit a record $2,962 a tonne.
PRICE FORECAST DOWNGRADES: Several investment banks updated their quarterly forecasts for metals prices, revising down gold. J.P. Morgan was now looking for gold to average $664 in 2007 and $716 in 2008 versus its previous estimates of $688 and $725 respectively. "Looking forward at the rest of the year, we believe gold price action may be muted," the bank said. "Assuming no major liquidity drainages, we expect gold to inch its way towards a $700-$725 range in 2008 before rolling in 2009 as a stronger dollar impacts the price."
UBS downgraded its 2007 gold forecast to $670 an ounce from $700 previously. Both institutions cited an acceleration of central bank sales as a bearish factor. Offsetting this was an inflow of just over nine tonnes of metal into the New York listed gold exchange-traded fund at the end of last week. Silver rose to $12.80/12.84 an ounce from New York's $12.68/12.73, taking it nearly back up to trading levels before June's heavy sell-off.
Platinum was backed by bullish fundamentals amid wariness over possible labour strikes in South Africa. Prices rose to their highest in a month at $1,303/1,307 an ounce, up from New York's $1,290/1,297. Palladium gained to $367/370 an ounce from $359.50/363.50.