Gold gained as much as 1% today to track a rebound in the equities market, with investors keeping an eye on the US dollar ahead of expected interest rate cuts by major central banks and the US presidential poll.
The US dollar rose on Monday ahead of the election as concerns about financial markets and the global economy prompted investors to seek perceived safety in dollar-demoninated assets. It was little changed in early trade on Tuesday.
Clues to the US election result could begin to emerge after the first polling booths begin to close late tonight.
Gold was trading at $US726.65 an ounce, up $US4.30 an ounce from New York's notional close on Monday, when it rose as high as $US738.15 before trimming gains due to a firm US dollar.
Gold has bounced more than 7% since falling to a 13-month low at $US680.80 in late October, when investors cashed in bullion to pay losses in stock markets. The metal was still below a two-month high of $US931 also hit last month as it struggled to revisit a record high of $US1030.80 in March.
"Rallies are likely to be used as fresh selling opportunities. The dollar and US elections this week would be of prima facie importance to markets,'' said analyst Pradeep Unni at Richcomm Global Services.
The Nikkei gained 3.7% on Tuesday after a market holiday on Monday, while the greenback was little changed against a basket of other currencies ahead of the US election results.
A win by Democrat Barack Obama, who is leading his Republican opponent, John McCain, in most polls, would be marginally better for the US dollar, if only because the Democrats already control Congress, analysts say.
That would make it easier for a new administration to push through activist policies to boost markets.
"In terms of where it goes from here, I think it's very difficult to say,'' said David Moore, commodities analyst at Commonwealth Bank of Australia in Sydney.
"My believe is that we might actually see the gold price move higher by the end of the year because you might ultimately see some diversification back towards gold,'' he said.
Physical demand was slow as price volatility turned away jewellers. Gold imports to India, the world's biggest bullion market, fell 27% in October year on year, the Bombay Bullion Association said.
Platinum was trading at $US804.00 ounce, down $US6 from New York's notional close. The metal was under pressure from falling demand for autocatalysts due to a slowing US economy and poor car sales.
