Gold rides on rising oil

Talks that other central banks would follow Australia's move to cut interest to stem the worsening credit crisis barely affected gold, which was also driven by a recovery in oil. Platinum jumped more than 3% on bargain hunting.

Gold was trading at $862.75 an ounce, up $5.30 an ounce New York's notional close on Monday, when it gained almost 4% on losses in equities markets - defying a rallying US dollar and weaker oil prices.

"There's a lot of safe-haven buying. Have we bottomed from the recent lows? In my opinion, we have already bottomed out," said William Kwan, bullion director at Gold Capital Management in Singapore, adding that a bounce in equities may be temporary.

"There'll still be further weakness in equities markets. It's going down further in the next two weeks," he said.

The MSCI Asia-Pacific excluding Japan stocks index rose 1.4%, rebounding from the lowest since December 2005, after a surprisingly large interest rate cut by Australia's central bank raised hopes other policymakers would follow suit.

In theory, weaker shares lift bullion's appeal as an alternative investment but dealers said declines in other commodities could potentially weigh on gold as well. The Reuters-Jefferies CRB Index, a global commodities benchmark, fell 5% to a 13-month low.

"I suspect that gold would receive support from safe haven buying in the near term and that might help it, but to be honest the outlook is extremely uncertain," said David Moore, analyst at Commonwealth Bank of Australia in Sydney.

"Our forecasts are for gold going back down into the $700s in 2009. We quote the gold price at around $740, just above $740 ounce as at the end of June 2009," he said.

Oil rose more than $2 a barrel after Australia's interest rate cut sparked guarded optimism that global central banks may act to stem the credit crisis and its fallout on oil demand.

Gold struck a record at $1 030.80 in March but has since traded in a wide range. It tumbled to an 11-month low $736 in early September before bouncing to its highest in two months at $920 late last month.

"I don't know if the crisis will spread to Asia but I guess safe haven buying is the most appropriate excuse to describe gains in gold prices. But there's no such thing as people rushing to buy gold bars or coins," said a physical dealer in Singapore.

"I think $820 will offer support for gold, while $900 will be the upside," said the dealer, referring to levels last seen in September.

Premiums for gold bars were unchanged at $1 to the spot London prices in Singapore.

Platinum was trading at $984.50 an ounce, up 23.00 from New York's notional close on a technical rebound, having fallen to its weakest since November 2005 at $920 on Monday on fears of falling demand for autocatalysts.

New York gold futures slipped $0.5 to $865.8 an ounce.

- Reuters