US gold turns higher but dollar, sentiment weigh

(Reuters) - Gold futures in New York
touched a two-week low early on Monday before rebounding on
bargain hunting, and silver contracts also hit a two-month low,
weighed down by a dollar rise and tepid buying sentiment. Bullion has held up relatively well in spite of a recent
rally in the dollar, but analysts said the strengthening U.S.
currency could drag gold lower in the near term. "It's just a lack of interest in gold right at this
particular time. Euro's getting hit, and crude oil and the stock
market are getting hit pretty good. I think eventually gold's
going to work lower," said Jay Kaplan, COMEX floor trader with
Hudson River Futures in New York. At 10:28 a.m. EST (1528 GMT), most-active February gold
GCG8 on the COMEX division of the New York Mercantile Exchange
was up $1.50 at $799.50 an ounce. It hit a high of $803.60 and a
bottom of $789.60, which marked the weakest level since Dec 3. The dollar rose against the euro on Monday, boosted by
year-end transactions and speculation of less aggressive Federal
Reserve interest rate cuts after last week's U.S. inflation
numbers. The greenback was also supported by an unexpected surge to
$114 billion in U.S. long-term capital inflows in October,
sharply higher than September's inflows of $15.4 billion.
[ID:nN17394150] A higher dollar makes gold, which is denominated in the
greenback, more expensive for investors holding other
currencies. Gold is also viewed as an alternative currency to
the U.S. dollar. John Reade, head of precious metals strategy with UBS in
London, told clients in a note that gold was relatively
supported in overnight trade despite further gains in the dollar
versus the euro, but bullion had fallen by the European
session. "With dollar strength apparently becoming somewhat
entrenched, at least in the near term, gold may head towards our
long-standing one-month forecast of $750 an ounce (spot)
although important support at $772/773 needs to break for that
to occur," Reade said. Spot gold was quoted at $794.50/795.20 an ounce,
compared with $792.70/793.50 in New York Friday afternoon.
London bullion dealers fixed the afternoon spot reference price
at $790.75. The U.S. Commodity Futures Trading Commission said in its
latest Commitments of Traders (COT) report that noncommercial
net long position climbed to 171,774 lots in the week up to Dec.
11, compared with 167,524 lots a week earlier. [ID:nN14181628] "The COT reports remain too extended for us to recommend new
long positions in any of the four precious metals, and we
continue to wait for a correction to initiate tactical longs,"
Reade said. Silver tracked gold to trade weaker. COMEX March silver
SIH8 hit a bottom of $13.650 an ounce, which marked the
weakest level since Oct. 22. It was down 1.80 cents at $13.965
an ounce, after hitting a high of $14.120 in the early
sessions. Spot silver was quoted at $13.81/13.86 an ounce,
compared with $13.80/13.85 late Friday in New York. London
silver was fixed at $13.745. NYMEX January platinum PLF8 was up $17.10 or 1.2 percent
at $1,496.30 an ounce. Spot platinum was quoted at
$1,492/1,497.