Gold extended gains on Tuesday, buoyed by a weaker dollar versus the euro, while platinum firmed as miners downed tools for a strike in top producer South Africa, highlighting supply constraints. Spot gold climbed to $798.80/799.50 per troy ounce by 1611 GMT, gaining over $8 from $790.10/790.80 quoted late in New York on Monday.
Currency fundamentals dominated sentiment as the dollar weakened versus the euro, making dollar-priced gold cheaper for non-US investors. Analysts also noted gold had benefited from its safe-haven appeal as dips in stock markets and US government bond yields attracted wider investment from buyers looking for shelter from problems in global credit markets.
"If you look at the Treasury market the yields are down significantly...we've seen quite a decent correlation recently between them and I suspect that's what's going on today...its (also) linked to stock markets being down," James Steel analyst at HSBC said.
Other analysts said that while gold looked fundamentally sound, the market was still vulnerable to pockets of selling as investors booked profits from this year's rally. Prices hit a 28-year high last month at $845.40 per ounce.
"Although fundamentally gold looks very positive, people are sitting on large profits and there's always a temptation to take those profits," Ross Norman, analyst at TheBullionDesk.com said.
In other bullion markets, the February gold contract on the COMEX division of the New York Mercantile Exchange was up $8.30 at $802.90 per ounce. Tokyo's benchmark gold futures contract for October 2008 delivery ended down 0.4 percent at 2,826 yen a gram. Spot platinum rose to $1,461/1,466 per ounce - from $1,455/1,459 late in New York on Monday, supported by a strike over safety in top global producer South Africa.
The country's biggest miners' union launched a one-day national stoppage involving almost 250,000 workers, to protest against deaths in the country's mines. "We expect the strike to support platinum and gold prices in the short term, and stricter safety regulations longer term, as these will mean lower production and rising costs," Commerzbank commodity analyst Eugen Weinberg said in a client note.
Platinum is mainly used in jewellery and auto production and the global market is seen ending this year in a sizeable deficit. Some analysts were cautious about how much impact stoppages were having on the market.
"They (supply disruptions) are very well telegraphed and thoroughly disseminated in the industry...but I do think there's some psychological support there," HSBC's Steel said.
Platinum hit a record high last month at $1,486 an ounce, with further rises expected if output is dented going forward. In other precious metals, silver was up $14.28/14.33 per ounce compared with $14.09/14.14 from late in New York on Monday. Palladium was barely changed at $346/349 an ounce from $345/348.