Gold steady as security, inflation fears support

Gold was steady on Monday, with support coming from renewed security and inflation worries, while yen-based gold inched up to its highest since last Tuesday.

Spot gold stood at $649.50/651.00 an ounce at 0311 GMT, versus $648.70/$650.20 in late New York.

"There are a number of supportive factors for gold now, and it's a question of when players will start buying on those incentives," said Koji Suzuki, a market analyst at Kazaka Commodity Co. Ltd.

Suzuki said players were wary of setting up new positions ahead of the Independence Holiday in U.S. markets on Wednesday.

Security fears came to the fore again after Britain raised its security rating to its highest level, "critical" -- meaning an attack is believed to be imminent -- after failed car bombing attempts in London and an attack on a Scottish airport.

Suzuki said active buying was likely to emerge after markets resumed trading following the Independence Day holiday.

Crude oil prices have eased, but continue to hover at a strong level leading to fears about inflation, which often helps boost the price of gold, seen as an inflation hedge.

U.S. crude oil was trading at about $70.40 a barrel in Globex electronic trading, down a touch from Friday when it rose $1.11 to $70.68.

Prices are still up about 8 percent from a month earlier.

The most active gold futures contract for June 2008 delivery on Tokyo Commodity Exchange closed the morning at 2,604 yen a gram, up 7 yen or 0.3 percent from the previous close, after earlier climbing to a high of 2,610 yen.

The dollar was trading at 123.03/123.07 yen, compared with 123.15/123.18 in late New York.

The yen stayed near a 4 1/2-year low against the dollar and an all-time low versus the euro on Monday after the Bank of Japan's tankan business sentiment survey supported the view that the central bank will raise interest rates gradually.

Cash platinum traded at $1,271/1,276 an ounce, compared to $1,270/1,274.00 in late New York.

Spot silver rose to $12.42/12.47 an ounce from $12.36/12.41 in New York.

Spot palladium fetched $364/369 an ounce, up from late New York levels of $362.50/366.50.

source:africa.reuters.com