Gold firms on weak U.S. dollar
SINGAPORE (Reuters) - Gold rose half a percent on Monday on a weaker U.S. dollar and light Chinese buying, but rising stock markets could curb gains, while platinum dropped on worries about slumping demand for autocatalysts.
Gold fell 3.5 percent in April as signs of economic recovery boosted risk appetite and dented safe-haven demand. Gold hit a near four-week high of $918.25 last Monday but failed to sustain the gains as investors shifted some of their money to shares.
Spot gold was quoted at $891.00 an ounce, up $5.20 from New York's notional close. Gold has fallen 11 percent since spiking to an 11-month high above $1,000 in February on profit taking, lower oil prices and gains in stocks markets.
"I think it's certainly consolidating. I am not convinced we won't see those highs again yet and possibly go higher," said Darren Heathcote of Investec Australia in Sydney.
"We are heading toward the wedding season, so we are getting a bit of support coming in on the downside as we dip. I think the dollar's probably the major driver at the moment," he said.
Gold buying has picked up in India during the wedding season, when jewelry is the most common gift during religious events and forms an essential part of the dowry basket.
Trading was thin, with Japanese markets closed for Golden Week holidays until Wednesday. Britain's markets are also closed on Monday for May Bank Day holiday.
The euro inched up to $1.3290 from $1.3264 on Friday after better economic data worldwide spurred hopes the worst in the global economy may be past.
Gold typically moves in an opposite direction to the dollar, which is often bought as an alternative to the U.S. currency. But the dollar and gold have recently tracked each other, reacting to risk aversion.
Hong Kong shares extended gains to rise more than 4 percent on Monday, sending the main index to its highest level since mid-October 2008, with investors cheered by signs of recovery in China and stabilization in the U.S. economy.
"Stocks are pretty good, so I don't think gold can move up much higher. There may be some resistance at $894," said a dealer in Hong Kong, a referring to a high seen in late April.
"We've seen light demand from physical buyers in mainland China, but it's such a thin market because of the absence of the Japanese," he said.
Platinum was at $1,088.00 an ounce, unchanged from New York's notional close, having fallen 2.27 percent in April.
Platinum is used to clean exhaust fumes from vehicles and slumping car sales during the global economic downturn weighed on sentiment.
U.S. auto sales fell 34.4 percent in April as the industry held near the lowest levels in nearly 30 years and closed out the month with Chrysler LLC filing for bankruptcy protection.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stayed at 1,104.45 tonnes as of May 3, unchanged since April 23.
ETF Securities, operator of Europe's largest platinum-backed exchange-traded fund, said its Physical Platinum fund (PHPT.L) saw an outflow of 16,600 ounces on Thursday, equivalent to 5 percent of its total holdings.
(Editing by Clarence Fernandez)
