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Gold creeps up, dollar hit a 26-year low versus the sterling

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Gold inched up on Tuesday after climbing more than 1% the previous day on a weaker dollar and security concerns, while Tokyo futures tracked dollar-based gold's rise to end up about 1%.

Trading was likely to be subdued ahead of the Independence Day holiday on Wednesday, when US financial markets will be closed, market participants said. Spot gold stood at $657.50/658.25 an ounce as of 0634 GMT, versus $656.70/$658.20 in late New York. A possible al Qaeda plot to detonate car bombs in London and Scotland spurred flight-to-safety buying of gold on Monday, which, coupled with a lower dollar, has helped lift bullion. However, traders said $665 was proving to be a strong resistance level.

On the Tokyo Commodity Exchange, the most active gold futures contract for June 2008 delivery finished at the day's peak of ¥2,625 a gram, up ¥28 or 1.1% from Monday's close. It was the highest level for a benchmark contract since June 25, when it climbed to ¥2,632. The day's trough was ¥2,609. In the currency market, the dollar hit a 26-year low versus the sterling and stayed near a record low against the euro as investors flocked to currencies whose rates are expected to continue climbing, while US rates were likely to remain steady. Dollar-denominated gold prices tend to rise when the US currency falls because it gains value in overseas markets.

The recent attacks in London and Scotland also spurred selling of the dollar ahead of the US national holiday, on concerns that the United States may also be a target. The dollar hit a three-week low of ¥122.09 on Monday. Strong crude oil prices also provided support for gold, as the precious metal is often bought as a hedge to inflation. US crude futures hovered around $71 a barrel, drawing strength from concerns over supply tightness.

On Monday, most-active gold for August delivery on the New York Mercantile Exchange settled up $8.30, or 1.3%, at $659.20 an ounce. Cash platinum rose to $1,283/$1,287 an ounce, from $1,278/1,282 in late New York. Spot silver fell to $12.60/$12.64 an ounce from $12.63/12.68 in New York. Spot palladium was mostly steady at $365/$370, versus late US levels of $366/$369. (ibtimes.com)

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