Gold hits 4 week highGold hits 4-week high, tracks oil
By Atul Prakash
Reuters
Monday, July 3, 2006; 6:51 AM
LONDON (Reuters) - Gold rose to its highest price in nearly four weeks on Monday, tracking strong gains in New York and gathering support from firm oil prices, dealers said.
But trading activity was expected to remain thin, exposing gold to sharp price fluctuations as U.S. markets would be closed on Monday and Tuesday for the Independence Day holiday.
"Gold is still benefiting from the rally late last week, resulting from a less hawkish Fed statement and the accompanying dollar weakness," said Yingxi Yu, precious metals analyst at Barclays Capital.
"Volatile conditions are likely to continue in the third quarter, largely sideways trading, and possibly regaining a clear upward trend sometime in the fourth quarter."
Spot gold hit a high of $620.50 an ounce before easing to $619.35/620.35 by 0944 GMT, higher than $612.60/613.60 last quoted in New York on Friday.
The metal gained more than 3 percent in the U.S. market at the end of last week as the dollar fell when tame inflation data backed up expectations the Federal Reserve may have arrived at the end of its two-year campaign of tightening monetary policy.
On Monday, the dollar traded around New York levels late on Friday versus the euro. A weak dollar makes gold cheaper for holders of other currencies and lifts demand for the metal.
"The U.S. holiday ... is likely to keep trading conditions on the thin side the first half of this week, however the improved fundamental and technical outlook in gold should see gold settle back into a gradual up-channel," James Moore, analyst at TheBullionDesk.com, said in a report.
Gold also garnered support from firm oil prices, which rose near $74 a barrel in anticipation of strong demand thanks to growing optimism over U.S. economic growth.
CENTRAL BANK REPORTS
Analysts noted reports suggesting that some central banks should buy gold.
A senior government economist said China should take advantage of any weakness in bullion prices to build up its official gold holdings as part of a strategy for diversifying its foreign exchange reserves.
The United Arab Emirates said the central bank was sticking with plans to convert up to 10 percent of its currency reserves into euros and could convert up to 10 percent into gold.
"It could be another supportive factor for sentiment," Barclays' Yu said, referring to the reports.
Other precious metals tracked gold's gains.
Platinum rose to a four-week high of $1,242 an ounce before retreating to $1,241/1,246, up from $1,224/1,234.
Palladium rose to $323/328 an ounce from $314/320. Silver hit a three-week high of $11.20 an ounce before falling to $11.17/11.23 , versus $10.96/11.06 in New York.
(Additional reporting by Lewa Pardomuan in Singapore and Chikafumi Hodo in Tokyo)
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