Gold climbed in Europe on Wednesday as oil prices rose, boosting the precious metal's appeal as an inflation hedge, and as the dollar retreated from a six-month high hit this week. Oil firmed more than $2 a barrel as fears grew that tropical storm Gustav could hit US oil installations in the Gulf of Mexico.
Gold rose to $831.00/832.00 an ounce at 1340 GMT from $822.90/824.30 an ounce late in New York on Tuesday. "Gold is mainly supported by a firm crude price," said Philip Carlsson, Saxo Bank's global products manager for futures and options.
"I don't see the market as all bullish though, and should the tropical storm create fewer problems than expected, the sell-off could be immediate," he added. Resurgent physical demand for gold coins and bars, which was a key factor supporting gold prices over $800 an ounce, is still supportive, traders say.
Jewellery demand is also expected to pick up going into September, especially in India, the world's biggest jewellery market. "Reports state that physical demand out of India is picking up ahead of the approaching festival season that peaks in October for Diwali," noted Marc Elliott, an analyst at Fairfax.
Spot platinum meanwhile climbed 1.5 percent as traders took advantage of a recent drop in prices to buy into the white metal. Palladium also ticked up 2 percent. Both metals have suffered from fears weaker economic growth will cut car consumption, denting demand for the platinum group metals as components in catalytic converters.
But after a sharp drop in prices throughout early August, both metals are now bouncing back. Spot platinum rose to $1,432.00/1,452.00 an ounce from $1,409.50/1,429.50 late in New York. Spot palladium firmed to $291.50/299.50 an ounce from $282.00/290.00. "We believe that palladium is chronically cheap relative to platinum," said J.P. Morgan analyst Michael Jansen in a note. Silver was steady at $13.55/13.61 an ounce from $13.56/13.64 an ounce late in New York.