London - Gold edged back up above $1,390 an ounce in Europe on Monday as last week's price dip of more than 2 percent brought physical buyers back to the market, with concern over the outlook for the euro zone also lending support.
Spot gold was bid at $1,390.30 an ounce at 1001 GMT, against $1,383.15 late in New York on Friday. U.S. gold futures for December delivery rose $6.80 an ounce to $1,391.10.
The precious metal rose to a record high at $1,430.95 an ounce last Tuesday but quickly surrendered gains to end the week down 2.2 percent. Its retreat has awoken fresh appetite from the metal among jewellers and physical investors, analysts said.
“Bullish momentum is still very much (intact), with reports of impressive physical demand from key consuming countries,” said Pradeep Unni, senior analyst at Richcomm Global Services.
The precious metal's recovery was kept in check by a firmer dollar, however, as the unit rose in response to the best US consumer sentiment reading in six months.
Strength in the US unit usually weakens gold, as it curbs the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Sharper risk appetite after upbeat US and Chinese economic data lifted equity markets and industrial commodities like copper, which touched a record high, on Monday.
US Treasuries tumbled in Asia on Monday, driving their 10-year yields to a new six-month high as Japanese investors kept dumping Treasuries on the spectre of higher growth and higher deficits in the United States.
“Gold has been highly correlated to the direction of US 10-year Treasury yields over the past week,” said UBS analyst Edel Tully. “The direction of Treasury yields will continue to influence gold's direction this week.”
“Rising bond yields are not a typical breeding ground for a higher gold price, but the recent strength of that correlation is perhaps exaggerated by investors taking the opportunity to bank profits before year-end,” she added. - Reuters
