* Gold hits highest since June 11 as dollar weakens
* Oil prices rally, boosted by stocks
(Updates prices)
By Jan Harvey
LONDON, July 27 (Reuters) - Gold rose to a new 6-1/2 week
high of $958.70 an ounce in Europe on Monday as the dollar
weakened, prompting investors to buy into hard assets such as
bullion, while firmer oil prices provided further support.
The metal remains in a range of $945-960 an ounce, with
strong technical resistance towards the $960 mark and weakness
in jewellery and investment demand capping gains.
Spot gold <XAU=> was bid at $956.45 at 1203 GMT, against
$950.35 late in New York on Friday. U.S. gold futures for August
delivery <GCQ9> on the COMEX division of the New York Mercantile
Exchange rose $3.50 to $956.60 an ounce.
Saxo Bank senior manager Ole Hansen said the dollar was
acting as the chief driver of gold during the seasonally quiet
summer period when liquidity is low.
"If there is nothing else there to be looked at, the dollar
will play a very important role," he said. Gold, which is priced
in dollars, often becomes cheaper for holders of other
currencies when the U.S. unit weakens. []
The dollar <.DXY> declined 0.39 percent against a basket of
six major currencies on Monday, while the euro and
commodity-linked currencies held firm as gains in stocks and oil
prices lent support. []
Oil rose for a third session to hit a three-week high as
stocks gained on hopes for an economic recovery that would boost
fuel demand. Gains in oil, the bellwether of the commodities
complex, are often followed by a rise in gold. []
European shares benefited from renewed investor enthusiasm
after a spate of better-than-expected U.S. corporate earnings.
The pan-European FTSEurofirst 300 <> share index is up 11
percent in the last fortnight and 41 percent since March. []
But physical gold demand, both for jewellery and investment,
is weak during the seasonally slack summer period, dealers said.
Investors in exchange-traded funds stuck to the sidelines,
with holdings of the largest gold ETF, the SPDR Gold Trust <GLD>
unchanged on Friday from the previous session and down nearly 8
tonnes week-on-week. []
JEWELLERS HOLD OFF
Jewellers in India held off on purchases as prices rose,
while jewellers elsewhere in Asia even sold scrap back onto the
market to take advantage of higher prices. []
However, the Commodity Futures Trading Comission reported a
9 percent rise in noncommercial net long positions in New York
gold futures in the week to July 21. []
While this suggests good support for gold, with speculative
interest heavily reliant on the strength of the dollar, the
metal may have to see a further decline in the U.S. currency
before making fresh gains, analysts said.
"If the dollar were to weaken further, gold can trade
higher, but positions are rather long at the moment, minimising
the upside unless the move is accompanied by strong safe-haven
buying via ETFs and coins," said UBS analyst John Reade in a
note.
In supply news, Harmony Gold <HARJ.J> said it has stopped
production at a mine shaft in Mpumalanga, South Africa,
following a fatal accident there on Friday. []
Among other precious metals, silver <XAG=> tracked gold
higher to break through $14 an ounce for the first time since
June 30. It was bid at $14.02 an ounce against $13.86.
Platinum <XPT=> was at $1,204.50 an ounce against $1,185,
while palladium <XPD=> was flat at $258.50 an ounce.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
