Gold extended gains on Monday, regaining its appeal as a hedge against inflation as oil prices bounced from a seven-week low, encouraging some investors to put their money back into bullion. Physical buying from jewellers also lifted prices but overall trading was slow.
Gold barely reacted to a series of deadly bombs in India, the world's main consumer, which suggested investors were taking cues from energy and currency markets, dealers said. Gold rose to $929.90/930.90 an ounce from $927.40/929.40 late in New York on Friday, when it moved in volatile $16 range. Gold was above last week's two-week low of $915.80 an ounce.
"We didn't see many large positions, so the market will keep the narrow range of $927 to $932," said Louis Lok, a dealer at Bank of China in Hong Kong. Despite the gains, gold was still below a four-month high of $987.75 hit on July 15 - not far from a record high of $1,030.80 struck in March. New York gold futures firmed on higher oil, while a weaker yen pushed up gold contracts in Tokyo precious metals futures.
India's major cities were put on high alert on Sunday, with fears of more attacks after at least 46 people were killed in two days of bombings that hit a communally sensitive western city and a southern hi-tech hub. In theory, geopolitical tensions boost gold's safe-haven appeal in times of uncertainty.
"Gold will probably continue on a slight bounce and hang around the $925-$930 region for now. We will probably face a bit of resistance around the $935 region," said Adrian Koh, an analyst at Phillip Futures in Singapore. "We've got to see how the dollar does tonight though," said Koh, adding that the gains were also technically driven after the sharp sell-off to below the $920s level.
Oil added 60 cents to $123.86 a barrel, having fallen to as low as $122.50 on Friday, its lowest since June 5, on worries of slowing demand. The euro was steady against the dollar at $1.5715. Spot platinum rose to $1,751.50/1,771.50 an ounce from $1,745.00/1,765.00 late in New York. Gold futures for August delivery on the COMEX division of the New York Mercantile Exchange added $3.2 to $930 an ounce.
The most active Tokyo gold contract for June 2009 delivery on the Tokyo Commodity Exchange rose 19 yen per gram higher to 3,248 yen but was off last week's 25-year high of 3,363 yen. Spot palladium rose to $384.50/392.50 an ounce from $380.50/388.50 late in New York. Silver edged up to $17.43/17.48 an ounce from $17.35/17.43 late in New York.