London: Gold prices extended gains above $1,000 an ounce in Europe on Monday, supported by weakness in the dollar in the wake of a meeting of Group of Seven finance ministers at the weekend.
The softer dollar is boosting interest in gold as an alternative asset, analysts said, as well as making the precious metal cheaper for holders of other currencies.
Spot gold was bid at $1,004.45 an ounce at 11.42 GMT, up from $1,001.30 late in New York on Friday. US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange edged up $1.30 to $1,005.60 an ounce.
As well as the weak dollar, gold is also being supported by fears over the sustainability of the recent stock market rally. US equities closed down and European stocks hit a four-week closing low on Friday after weak US non-farm payrolls data.
“Gold is in a period of going sideways, consolidating before the next significant move,” said Mitsubishi precious metals strategist Tom Kendall. “It is (being influenced by) the dollar, but there is also a degree of nervousness among equity investors,” he said. “There are some pieces of news that are keeping people wary.”
The dollar fell on Monday after a meeting of Group of Seven finance ministers in Istanbul brought no surprises, which the market took as a signal policymakers are comfortable with a gradual dollar decline as part of global economic rebalancing.
The dollar index, which measures the US unit’s performance against a basket of six other currencies, edged down 0.13% to 76.893.
Meanwhile, European shares edged higher after hitting a four-week closing low on Friday in the wake of higher-than-forecast US jobless numbers, but gains were choppy as investors were cautious over the market outlook.
Elsewhere, oil prices, which are often tracked by gold, slipped as investors worried about the pace of US economic recovery.
Gold prices took some support from an upturn in physical demand for the metal, with jewellery sales in India, the world’s largest gold consumer last year, recovering ahead of Diwali later this month.
The strong rupee is helping offset a sharp rise in dollar gold prices, dealers said.
Meanwhile, holdings of the world’s largest bullion-backed exchange-traded fund, New York’s SPDR Gold Trust, edged up 1.221 tonnes or 0.1% on Friday.
Analysts say they are still concerned about the volume of speculative net long positions in US gold futures, though these positions declined a touch in the week to 29 September from the record levels they reached the week before.
“While speculative net long positions fell during the week of 29 September...they continue to stay at a relatively high level,” said Commerzbank in a note. “The risk of position squaring remains, which could weigh on the gold price.”