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Gold higher in Europe as dollar falls

LONDON: Gold bullion held close to its highest levels for 10 days in Europe on Monday, bolstered by the weakness of the dollar and safe-haven buying, traders and analysts said.

Gold gained nearly $4 an ounce over the weekend as worries that a long war in Iraq could derail the global economy left investors seeking safe havens.

Spot gold rose to $335.35/336.05 per ounce by 1537 GMT from $331.60/332.20 at New York's Friday close.

The dollar tumbled more than one percent against the euro, yen and Swiss franc on Monday.

"As the markets begin to adjust expectations for a longer war, the dollar has weakened, equity markets are down, and the gold price is rising," Merlin Marr-Johnson, analyst with HSBC London said in a report.

"We expect gold prices to appreciate gradually from current levels, perhaps trading up to $350/oz, over the coming 6-8 weeks."

Oil prices spiked sharply upwards on fear that the war and renewed weekend violence in Nigeria would disrupt supplies. This should also help cement positive moves in gold.

"The chief reason for the latest move (in gold) has been the softer dollar, and this has been a little helped by weaker stocks (markets)," a trader said.

"Of course, all eyes will still be on Iraq to see how that might affect things, although we're expecting a relatively quiet day for gold if nothing dramatic happens " he said.

Most European traders reported very low-key activity and expected gold to range comfortably above $335.00 in the short term.

"Gold is likely to remain in a nervous state for some time to come, and with the coalition preparing themselves for a push to Baghdad...I think that gold is going to see further gains as time progresses," James Moore of TheBullionDesk.com said.

Silver was quoted at $4.45/4.47, versus $4.43/4.45 at the New York close, aided by gold's strength.

In the platinum group metals, platinum was at $640.00/645.50, up from $634.00/639.00 previously, but moved off an intraday peak at $645.00.

Palladium remained under pressure, tumbling back down to near last week's 5-3/4 year lows.

It was quoted at $182.50/187.50 an ounce, down from $189.00/196.00. The metal, used mainly in auto-catalysts, touched $174.50 last week - its lowest since July 1997.-Reuters