SINGAPORE (Reuters) - Gold rose more than half a percent on Monday after firm oil prices prompted safe haven buying from investors and speculators, while technical buying also resurfaced after bullion bounced from its weakest level in two months.
But gains may be capped by worries that a plan by main consumer India to double its import duty could cause a temporary slip in purchases. Silver tracked gold higher, while platinum prices stayed at premiums to bullion on supply concerns.
Gold added $9.35 to trade at $1,662.84 an ounce by 0323 GMT after posting a 3 percent fall last week in its second-biggest weekly decline this year, on fading expectations of more monetary easing in the United States.
Bullion raced to a record of around $1,920 last September on fears the euro debt crisis could stall global growth.
“You can see there’s short-covering. I think it’s technical. The upside will be at $1,675 to $1,680, and there will be some resistance there,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
“Gold wants to break test these levels, but if it can‘t, it will go back to $1,600 again. Let’s see what happens to the market after the increase in India’s duty.”
India’s customs duty on gold and platinum rose from March 17 after Finance Minister Pranab Mukherjee announced the move on Friday among steps to cut the deficit in his 2012/13 budget.
Indian consumers had yet to return to physical market on Monday, having bought some gold in panic buying triggered by the announcement on Friday.
U.S. April gold rose $7.60 to $1,663.40 an ounce.
Money managers in gold and silver futures and options reduced their net long positions for a second straight week in the week of March 13, as both markets consolidated from their late-February plunges.
The fall in gold prices has prompted one or more central banks to buy as much as four tonnes of bullion in recent weeks, according to an industry source and a Financial Times report on Friday.
U.S. crude oil futures extended gains on Monday on continuing tensions over Iran’s disputed nuclear programme and the potential for supply disruptions in the region, which raised fears of inflation.
But a firm dollar and equities still weighed on gold as an improving economic outlook in the United States prompted some investors to shift their money back to riskier assets.
On Friday, the benchmark Standard & Poor's 500 Index .SPX stayed above the 1,400 level it reached last week for the first time since May 2008, while European stocks hit their highest level since before the market's slump in late July.
The International Monetary Fund expects global economic growth to slow, with the United States looking much improved, although growth in emerging economies is weaker than expected, Deputy Managing Director Zhu Min said on Monday.
In Singapore, dealers waited for Indian gold jewellers to re-enter an otherwise dull physical market.
“I see some light selling from Thailand. It’s very light. I would think some people are waiting for prices to go down to the $1,650 level,” said a dealer in Singapore, referring to demand from jewellers.
Many Indian families buy gold as an investment in a climate of high inflation and crimped real interest rates. Gold is also an integral and important part of weddings, often representing the wealth of a bride and acting as her security.