| May 27, 2006
) - Gold rallied above $650 an ounce on Friday, lifted by buyers looking for a bargain, but analysts said the market remained vulnerable after its recent fall from 26-year highs.
Market players were wary about chasing prices much higher ahead of a long holiday weekend in the United States and Britain and much-awaited U.S. inflation data later in the session.
"Today stabilization is the name of the game. Gold seems to be trying to establish itself in a range which is probably $638-$675 an ounce," John Reade, precious metals analyst at UBS Investment Bank, said.
"I doubt people will want to climb into this market and re-establish long positions ahead of the weekend...we might see people coming back onto the long side sometime next week."
Gold
In Asia, benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange, currently April 2007, rose 17 yen per gram to 2,397 yen, reflecting gains in New York.
"Gold's ability to work back above $650 is positive although the lack of clear direction still leaves the metal vulnerable to corrections lower," said James Moore, precious metals analyst at TheBullionDesk.com.
"A period of steady range play would be constructive, however with the scale of volatility and uncertainty across all the markets, that seems unlikely."
Gold surged to $730 on May 12, the highest since January 1980, as funds and investors poured money into the metal on worries about rising oil prices, tensions over the Middle East and uncertainty in the dollar's outlook.
The dollar edged up to hover in a narrow range ahead of U.S. inflation data. The currency tumbled last week to one-year lows against the euro and sterling but won respite this week from investor caution over a global sell-off in other markets.
UPSIDE POTENTIAL
Daniel Sacks, head of resources at Investec Asset Management, said gold was being driven upwards by fears about oil-induced inflation, geopolitical turmoil and a weaker dollar. Despite recent corrections, none of these factors had changed.
"Political and economic upheavals are the meat and drink of gold bull runs. They are difficult to forecast and by their very nature are the stuff of violent volatility.
"But if gold stays in favor as a risk-diversifying asset class, I believe there could be far more upside, as investors look for safe havens and the market discovers that there is so much money and so little gold supply."
Dealers noted light physical buying in Asia. Premiums for gold bars were unchanged at zero in Singapore, center for bullion trading in Southeast Asia
They also kept a watch on oil, which extended gains above $71 a barrel, buoyed by healthy U.S. economic growth that hinted recent record-high prices may not hit robust demand.
Gold is often seen as a hedge against inflation.
Platinum
Silver
$12.66/12.76.
