By Renita D. Young and Eric Onstad
NEW YORK/LONDON (Reuters) - Gold rose on Monday, touching its highest in two weeks as the dollar weakened and the Chinese yuan recovered from June's lows, and gold stayed higher even as the dollar bounced up, as some investors bought bullion to cover short positions.
Some traders noted that gold was still mired near lows hit in December.
Spot gold increased 0.3 percent to $1,258.52 per ounce by 1:36 p.m. EDT (1736 GMT). The session high of 1,265.87 was its highest since June 26.
U.S. gold futures for August delivery settled up $3.80, or 0.3 percent, at $1,259.60 per ounce.
"Most likely the yuan will remain volatile but (I don't expect ...) aggressive weakness, so that means the only thing that is driving gold at the moment is the dollar, which is somewhat weaker," said Georgette Boele, commodity strategist at ABN AMRO.
The yuan rose in offshore markets against the dollar, further off the lows hit in June when it notched its biggest ever monthly fall. The U.S. dollar index weakened early and the euro gained, but the dollar bounced higher in later trading.
A weak dollar makes greenback-denominated gold cheaper for holders of other currencies, especially in Europe when the euro rises.
Graves said Monday's gold price increase will likely be temporary.
"It's running into lows we saw in December--$1,275. Until we see some moves above there, I don't think gold has the strength to get (higher)," Graves said.
Meanwhile, silver rose 0.6 percent at $16.10 an ounce and platinum gained 0.4 percent at $844. Both metals earlier hit their highest since June 27.
Palladium gained 0.5 percent to $958 an ounce, reaching $967.50, its highest since June 21.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)