Gold bounces after dip, Tokyo launches mini-gold

SINGAPORE (Reuters) - Gold rebounded on Tuesday, with the U.S. dollar at near record lows against the euro, but investors were careful about buying the metal too strongly ahead of a testimony by Federal Reserve Chairman Ben Bernanke later in the week.

Trading resumed in Tokyo futures after a holiday but all gold contracts fell in sympathy with declines in New York's COMEX market and a generally firm Japanese yen.

Spot gold hit an intraday high of $666.15 an ounce before slipping to $664.60/665.30, still higher than 664.00/664.80 an ounce late in New York on Monday, when it fell more than $2 on technical sales.

"The short-term trend is still technically biased to the upside and the market is trading above the key 100 moving average," said Pradeep Unni, analyst at Vision Commodity Services in Dubai.

"The only risk is the stiff resistance around $670 levels in the spot gold chart. Once the market breaks the resistance, expect a rally in spot gold to $674 to $680," he said.

Most active June 2008 gold futures on the Tokyo Commodity Exchange ended 20 yen per gram lower at 2,634 yen, having risen to its highest in five weeks to 2,656 yen last Friday.

Tokyo dealers shrugged off Monday's earthquake that killed nine people and injured around 1,000, and instead focused on the launch of a new "mini" gold contract to revive turnover.

TOCOM's mini gold futures contract started trading, with high volumes which reflected strong demand from retail investors for the handy, less costly alternative to the existing contract.

The most active December contract closed at 2,624 yen per gram after opening at 2,625 yen and hitting a high of 2,627 yen.

The contract's trading unit is 100 grams a lot, one-tenth the size of the existing gold futures contract. Its initial margin is 87 percent less than that for the existing version.

"It's the first day and trade is fairly active," said Kaname Gokon, deputy general manager at Okato Shoji Co. Ltd.'s research section. "Whether this trend continues on the second day and in the future will depend on the consistency of prices."

Turnover of the mini gold contract, the first derivatives contract listed by Japan's top commodity exchange in three years, totaled 22,258 lots at the close. That compared with 38,737 lots for normal gold futures.

The euro edged up to $1.3786, hovering near a record high of $1.3815 hit on Friday, according to electronic trading platform EBS, as concerns about problems in the U.S. subprime market pressured the U.S. currency under selling pressure.

The dollar was flat at 121.80 yen, having recovered from a one-month low of 120.99 yen hit last week.

"Although market participants do not expect any surprising comments from the Fed on inflation or the subprime fallout, investors and traders will scrutinize the comments to discern the economic status from the Fed's standpoint," said Unni of Vision Commodity Services.

But any signs of concerns from Bernanke about problems in the subprime market when he delivers his semi-annual testimony on monetary policy on Wednesday and Thursday may prompt more selling in the dollar, said dealers.

In addition to Bernanke's testimony to the U.S. Congress and the Senate, dealers also await data on June consumer prices on Wednesday and the June figures on housing starts and building permits.

Platinum fell to $1,306/1,310 an ounce from $1,313/1,317 late in New York. Palladium XPD= eased to $365/370 an ounce from $366/369.

Silver edged down to $12.92/12.96 an ounce from $12.94/12.99 an ounce.