Gold extended gains and rose 1 percent on Tuesday as record oil prices and recent falls in the dollar encouraged some investors to put their money back into the precious metal. But gains could be limited as gold has yet to retest the key resistance mark of $950 an ounce after falling from a record high of $1,030.80 an ounce hit on March 17.
Platinum bounced and regained $2,000, while silver and palladium also firmed. Gold rose to $935.10/935.90 an ounce from $925.30/926.10 late in New York. It hit an intraday low of $914.10 on Monday before rebounding to hit a high of $931.10 as US oil futures settled around $111 a barrel.
"Gold just moves up along with firmer oil prices. That's the only reason why I think gold is currently trading at this level," said Peter Tse, a dealer at Scottia Mocatta in Hong Kong. "Basically, we are still in the range between $915 and $938," said Tse, adding that there was light physical buying.
US oil futures surged to a lifetime high of $112.48 per barrel on Tuesday on supply disruptions and a weak dollar, after London Brent crude futures also surged to a record. High oil prices elevate gold's appeal as a hedge against inflation.
In the physical sector, purchases from India, the world's largest gold consumer, have kept the physical market alive during the wedding season, but wild swings in bullion prices crimped demand in other parts of Asia. The euro dipped to $1.5824 but was up from Monday's low of $1.5658. It hit a record high of $1.5915 on electronic trading platform EBS last Thursday.
"Market participants are still very much on the long side. We need to see fresh buying from the funds to bid gold up to above $940," said William Kwan, a dealer at Phillip Futures in Singapore. "I am still expecting the upside at $935 and the downside at $915," said Kwan, referring to Tuesday's trading range.
Investors awaited US data and first-quarter results from financial institutions this week for clues on the state of the economy and credit markets. Spot platinum rose to $2,000/2,010 an ounce from $1,958/1,968 late in New York. It tumbled to its lowest level in nearly two weeks at $1,940 on Monday to track weaker gold and a sell-off in Tokyo futures.
The most active Tokyo platinum futures jumped 200 yen per gram to 6,360 yen, having fallen by its limit on Monday. Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange added $9.6 an ounce to $938.3 an ounce. Silver edged up to $18.01/18.06 an ounce from $17.78/17.83 an ounce. Spot palladium rose to $461/467 an ounce from $459/463 an ounce.