Spot gold hit a record high above $1,126 an ounce on Monday when massive buying in U.S. gold futures boosted bullion's appeal, but the precious metal later fell from its peak as follow-through buying failed to materialise.
Investors maintained their appetite for gold as a hedge against currencies as the U.S. dollar drifted lower in Asia, extending falls from late last week.
Underlining views that a global economic imbalance is being reflected in the weakening dollar, the head of the International Monetary Fund said a stronger Chinese yuan is part of the reforms that Beijing needs to implement to increase domestic consumption.
Financial markets are expected to see increased rhetoric on currencies this week from both China and visiting U.S. President Barack Obama.
News on Monday that commodities funds manager Blackrock Investment [BLK 233.10 1.85 (+0.8%) ] expected central banks to be net gold buyers in 2009 also helped gold's rise, now that the precious metal is more sensitive to bullish news than bearish news, traders said.
Spot gold was at $1,123.20 an ounce at, up 0.4 percent from New York's notional close of $1,118.50. It earlier rose as high as $1,126.30, an all-time high.
Gold has renewed record highs for 7 days out of the past 10 sessions, during which it has risen more than 6 percent. The previous record was $1,122.85 marked on Thursday.
U.S. gold futures for December delivery stood at $1,124.10 an ounce, up 0.7 percent from Friday's settlement. The contract in early Asian trade reached a new record high of $1,127.90.
"Buying soon after Asia's opening proved to be temporary," said Yuichi Ikemizu, Tokyo branch manager for Standard Bank, referring to buy orders in substantial lots in early in Asia for
December gold futures at $1,127.90 per ounce.
"But the existence of bullish players who bought in such an aggressive manner itself showed how strong the market's momentum is," he said.
Volatility in gold prices is expected to stay relatively high in coming days as substantial amounts of open positions remain in U.S. December $1,200 call options, whose expiry is due later this month.
Buying call options has been one strategy for gaining exposure to gold.
Spot platinum tracked gold's gains and rose 0.4 percent to $1,395.00 an ounce from New York's notional close of $1,390. It earlier hit a 14-month high of $1,398.00.
On Friday platinum broke through above $1,390 for the first time since September 2008 after news that Impala Platinum Holdings forecast output from Rustenburg, its main mining area, would fall by 100,000 ounces this financial year to 850,000 ounces, due to closures over safety and a two-week strike.
Impala Platinum is the world's No. 2 producer of the metal used to clean vehicle exhaust fumes and make jewellery.
Spot silver was up 1 percent at $17.59 per ounce.
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