US gold futures climbed on Tuesday on the back of inflation fears due to a bounce of crude oil prices, after heavy liquidation erased sharp initial gains which took the market to record highs on Monday.
Analysts said that Monday's pullback from all-time peaks has taken a toll on sentiment among bullion investors, and gold must hold on to gains in the near term to rise further. Adam Hewison, president of INO.com in Annapolis, Maryland, said that he would not be surprised to see some backing and filling in gold after the previous session's significant pullback.
"Psychologically, the perception of the market has been somewhat dampened with the action yesterday. What we have to look at is how we close out for the week. If we close lower than we did last Friday, then certainly there are going to be a lot of question marks since we might have seen a top on the gold," Hewison said.
At 10:59 am EDT (1459 GMT), the active gold contract for April delivery on the Comex division of the New York Mercantile Exchange was up $4.90 at $1,007.40 an ounce. It traded between $1,013.40 and a bottom of $994.80. Hewison said that $960 an ounce would be a major support area for gold. However, he expects gold to quite easily pull back below $1,000.
On Tuesday, US stocks were 2 percent higher after a volatile Monday session, and that dented gold's appeal as a safe-haven investment in times of financial market crises and economic uncertainty. Rising crude oil prices also boosted gold, which is used as a hedge against inflation. US crude futures jumped $2 to $107.70 a barrel after falling nearly $7 on Monday.
Spot gold traded at $1,006.50/1,007.00, up from $1,001.00/1,001.80 at the close Monday. London bullion dealers fixed the morning spot price at $1,005.75 an ounce.
Comex's May silver was down 6.5 cents to $20.235 an ounce. It traded between a bottom of $19.950 and a high of $20.510. Spot silver dropped to $20.13/20.18 from $20.35/20.41 at Monday's close. London silver was fixed at $20.38. Platinum group metals also rebounded on bargain hunting after a broad commodities sell-off on Monday.
The Nymex platinum contract for April delivery gained $22.30, or 1.1 percent, to 1,995.70 an ounce. Spot platinum fetched $1,990/2,000. Nymex June palladium edged up $1.20 to $486.50 an ounce. Spot palladium was at $478/488.