Gold up as oil boosts demand

Gold gained in Asia as crude oil rose, boosting the appeal of the precious metal as a hedge against inflation. Silver also rallied.

Crude oil in New York increased as much as 0.6 per cent today on speculation that US stockpiles fell last week and on a report that industry inventories dropped in the world's most-developed economies. Gold, which has advanced 27 per cent this year, is 4.6 per cent below its 27-year high of $845.84 reached on November 7.

Bullion for immediate delivery gained as much as $4.70, or 0.6 per cent, to $806.70 an ounce, and traded at $806.60 at 2:32 pm Singapore time. Silver for immediate delivery advanced 1.7 per cent to $14.87 an ounce.

Gold for December delivery on the Comex division of the New York Mercantile Exchange climbed 1.1 per cent to $807.60 an ounce at 2:33 pm Singapore time. In Japan, the most active gold futures contract gained 0.9 per cent to 2,912 yen a gram ($813 an ounce) on the Tokyo Commodity Exchange. Crude oil for December delivery rose as much as 53 cents, or 0.6 per cent, to $91.70 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract was at $91.69 at 2:29 pm in Singapore.

"In the medium term, consolidation above $745 implies a test of the all-time high and thereafter $1,000 in 2008," analysts at Barclays Capital, led by Jordan Kotick, wrote in a report dated November 13.

A move through "near term resistance" at $812 to $818 was needed to reduce the potential for a price fall, Kotick wrote.

So-called support and resistance levels are points where buy or sell orders cluster on charts used by some traders to determine price direction.

The gold market was entering a "volatile consolidation phase" before continuing to rise, according to Darran Grabham at Standard Bank Group in South Africa.

Support was at $783.45 an ounce, while a move below $770 an ounce could lead to prices falling to $745.50, wrote Grabham, head of technical analysis at Standard Bank.