Gold rises nearly $7 on Asian demand

Singapore: Gold rose nearly $7 the back of firmer oil prices on Friday, hovering near its highest level in more than two weeks, with demand from jewellers ahead of the festive season in Asia also offering additional support.

India, the world's largest consumer, is stepping up purchases ahead of the festive season which will peak in October with Diwali, the Hindu festival of lights. Buying before Ramadan in September also spurred trading.

Gold firmed to $838.15/$839.15 an ounce from $831.45/$832.65 an ounce late in New York. Gold jumped to $844.00 an ounce on Thursday, its highest level since August 11, before paring some due to a firming dollar.

Supply of gold bars remained tight in Singapore, which was due to slow arrivals of stocks from refiners in Europe, said Beh Hsia Wah, a dealer at United Overseas Bank.

"The premium is pretty high. The European side says supply may be back to normal by mid-September but I am not too sure about that," she said.

Premiums for gold bars were steady at this year's high of between $1.20 and $1.80 to the spot London prices. .

Dealers expected gold to trade in volatile $830 to $845 range amid low volumes ahead of Monday's Labour Day holiday in the US.

"If anything, gold promises to remain volatile. In the near term, gold-price movements will continue to reflect the ups and downsin the US dollar/euro exchange rate," said Jeffrey Nichols, managing director of American Precious Metals Advisors.

The dollar slipped against a basket of currencies on profit taking and after oil rose more than $1 to $117 a barrel on worries about possible supply disruptions caused by Tropical Storm Gustav.

Gold has bounced as much as nine per cent since tumbling to nine-month lows around $773 two weeks ago, on high oil prices and demand from jewellers in Asia and other parts of the world. But gold is trading below a record high of $1,030.80 hit in March.

"I've noticed that Indian housewives are far better forecasters of the gold price than most of us paid to do the job - and,today, Indian housewives are buying the yellow metal," said Nichols of American Precious Metals Advisors.

"Fortuitously, physical demand has picked up sharply in the past month, particularly among retail investors. We've seen this in India where jewellery demand has picked up early in response to low prices ahead of the festival season."

The new benchmark contract on the Tokyo Commodity Exchange, August 2009, ended seven yen per gram higher at 2,944 yen.

New York gold futures added $6.1 an ounce to $843.30. Spot platinum fell to $1,464.50/$1,484.00 an ounce from $1,469.00/$1,489.00 late in New York on Thursday.

Platinum, which plummeted to 11-month lows around $1,296 last week, has suffered from expectations car demand will slow as the global economy falters, cutting demand.

London (Reuters) Gold could rally back up towards $900 an ounce in the coming months, as a fall from its all-time high has boosted physical demand to its highest level in 20 years, investment bank UBS said yesterday.

Bullion touched a record high of $1,030.80 an ounce per tonne in March but the dollar's rise has taken around 20 per cent off its gains.

"The correction in the gold price from all-time highs to a recent low of $775 an ounce has triggered the strongest physical demand for gold our vault staff have seen in 20 years," UBS analysts said in a research note.

"Demand - mostly for jewellery - is strong from Indian, other Asian, Middle Eastern and some European clients and comes after a period of 12 months of unusually weak physical gold demand," it said.

The bank said the yellow metal could trade towards $900 an ounce over the next month or twol.

UBS was bullish for some of the industrial metals such as nickel and zinc, as several miners cut back production due to low prices.