By Eric Onstad
LONDON (Reuters) - Gold extended its recovery on Monday, touching its highest level in nearly two weeks as the dollar weakened, the Chinese yuan rebounded and some investors reversed bearish gold bets.
Spot gold was up 0.7 percent at $1,262.37 an ounce by 1400 GMT, its strongest since June 26.
U.S. gold futures for August delivery rose 0.6 percent to $1,263.30.
There has been a strong correlation recently between the yuan and gold, analysts said.
"I think 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 in Amsterdam.
The yuan rose half a percent in offshore markets to 6.6292 against the dollar, further away from the lows hit in June - its biggest ever monthly fall. At the same time, the dollar index weakened and the euro gained.
A weak U.S. dollar makes greenback-denominated gold cheaper for holders of other currencies, especially in Europe when the euro rises.
The euro hit a session high after European Central Bank Governing Council member Ewald Nowotny said the bank could decide this month to end bond buying by the end of this year.
OCBC analyst Barnabas Gan said that some investors had bought gold to cover their short positions.
"With the ongoing U.S.-Sino trade tensions, the resignation of David Davis will likely be a sideshow, though it may raise some concerns amongst market-watchers, depending on how the overall Brexit issue progresses," he added.
Britain's Brexit Secretary David Davis said on Monday that he had resigned to try to stop Prime Minister Theresa May from handing too much power to the European Union.
It was unclear whether a rebound in spot gold would continue after it hit a seven-month low of $1,237.32 last week, Boele said.
"This could already be the bottoming out, but I think you will still get another test lower because we expect a recovery in the dollar and higher yields for the coming quarter."
Among other precious metals, silver rose 1.1 percent to $16.18 an ounce and platinum gained 1.8 percent to $856. Both metals hit their highest since June 27 during the session.
"We think a near-term recovery in gold back above $1,300 could trigger some unwinding of record short positions in platinum and help the market climb towards $900," UBS strategist Joni Teves said in a note, adding that the bank downgraded its 2018 average price forecast to $950 from $985.
Palladium gained 1.1 percent to $963.50 an ounce, its highest since June 21.
(Additional reporting by Karen Rodrigues in Bengaluru; Editing by Mark Potter and David Goodman)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
