Gold jumped above $668 an ounce today to its highest in seven months before losing some of the gains to weaker oil prices, but dealers were upbeat after the metal cleared a technical hurdle last week.

Spot gold hit an intraday high of $668,20 an ounce, its best since mid-July on short covering, before slipping to $665,75/666,50 an ounce in early trade, slightly lower than $666,50/667,20 late in New York. A public holiday in key player Japan also capped gains.

Gold rose about 1% in the US market on Friday after crude oil regained $60 a barrel for the first time since early January, triggering fund buying and short covering, and helping the metal breach $662 an ounce. Firm oil prices raise gold’s appeal as a hedge against inflation.

"I think post-G7, there’s speculation about where the yen would go, what that would possibly also mean, I suspect for gold, with Japanese fears of inflation," said Darren Heathcote of Investec Australia in Sydney.

"We might see more of a reaction tomorrow when TOCOM reopens. Certainly, gold is technically looking strong. I see no reason why, at this present moment, we wouldn’t want to head north again to test recent highs," he said.

Upside targets were pegged around $676 and $684 an ounce. Purchases from Japanese investors helped gold reach multi-year highs last year. Gold hit a 26-year high of $730 an ounce in mid-May.