Monday, November 20, 2006

Forex News: 2-Gold rises as jewellers buy, platinum up nearly 2 pct

SINGAPORE, Nov 20 (Reuters) - Gold firmed on Monday after last week's drop in prices spurred buying from jewellery makers in the run up to Christmas, while platinum reversed losses and gained nearly 2 percent on fund buying.

Spot gold hit a high of $624.50 an ounce and hovered at $623.10/624.10 by 0713 GMT, higher than $621.10/622.10 late in New York.

Gold fell to ts lowest in nearly a week around $614 on Friday before bouncing back on a weaker dollar and as oil trimmed losses.

"Physical demand is there and it will help underpin it a little bit, but it's probably not going to drive it higher," said Darren Heathcote of Investec Australia in Sydney.

"The real big movement is coming from the investment funds at the end of the day. We'll probably find support around $614, with a cap for the time being probably somewhere around $625," he said.

Gold has lost around 2 percent in value since rallying to a two-month high of $636.50 on Nov. 10 on a weaker dollar and news that China plans to diversify its foreign exchange reserves.

The euro inched up to $1.2840 from around $1.2830 in late U.S. trade.The dollar climbed to 117.90 yen from around 117.75 yen in New York on Friday, when it fell on soft U.S. housing starts data and on rumours, later denied, that a U.S. hedge fund was in trouble.

Platinum rose to $1,207/1,212 an ounce from $1,185/1,191 in New York, driven by renewed buying from investors in Japanese futures as well as jewellers ahead of Christmas.

Key Tokyo Commodity Exchange platinum for October 2007 delivery <0#jpl:> rose 85 yen to 4,402 yen a gram by the close. The contract fell as low as 4,288 yen on Friday, a one-week low.

Cash platinum tumbled to a two-week low of $1,138 on Friday as investors ditched the metal following a supply and demand report by Johnson Matthey, the world's top platinum distributor.

Last week's report said that supply and demand for platinum were likely to reach record levels in both 2006 and 2007, leaving the global market close to balance.

"This is a good time for jewellers to buy gold and platinum because they have to prepare for Christmas demand. That will offer good support for prices," said a dealer in Tokyo.

"The upside target for gold is $640 and we should reach that level by the end of the year. It may even trade higher than that," said the dealer, referring to a level last seen in September.

Tatsuo Kageyama, an analyst at Kanetsu Asset Management, said chances of a recovery in the precious metals market would largely depend on oil prices.

"The prospect of precious metals would depend on whether or not the slide in crude oil prices halts," he said.

Benchmark gold futures <0#jau:> on the Tokyo Commodity Exchange ended 16 yen per gram higher at 2,395 yen per gram, reflecting gains in cash gold.

Silver edged up to $12.82/12.89 an ounce from $12.75/12.82 late in New York.

Palladium was unchanged at $317/322 an ounce. (Additional reporting by Risa Maeda in Tokyo)


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