Gold extended gains to above $925 on Wednesday, as investors focused on the dollar's weakness, boosting its appeal as an alternative to the greenback, but a resurgence in risk appetite may limit bullion's gain.
The dollar slumped to a four-month low against a basket of currencies on Wednesday and faces renewed selling amid a recovery in risk appetite that has curbed safe-having buying.
"The US dollar has shown substantial weakness in the last two weeks, and there is quite a strong downward momentum in the currency which is supporting gold prices," said Toby Hassall, an analyst with Commodity Warrants Australia.
"Gold is a currency in itself, so weakness in the US dollar provides strong support to gold even if we see investors reallocating money back to equities or commodities such as crude oil or raw materials," he said.
Spot gold was at $925.60 per ounce at 0240 GMT, up 0.4 percent from New York's notional close of $921.85.
US gold futures for June delivery were $926.3 an ounce, up 0.3 percent from Tuesday's settlement on the COMEX division of the New York Mercantile Exchange.
A Singapore-based trader said gold's upward momentum was triggered after stop orders were hit at $925, lifting prices above $927. "There's been a follow-through buying but physical selling is capping tops, keeping trading in a $925-$927 range," he said.
With investors seeing stock market gains as reflecting increasing optimism over the economy, money flowing into gold-backed securities has stalled.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1,104.09 tonnes as of May 12, unchanged since May 6. - Reuters
