Gold was steady on Monday, staying within sight of last week's high, while the benchmark Tokyo futures contract rose 2 percent to its highest in more than a week due to a weaker yen and a strong New York close.
Other precious metals such as platinum and silver on the Tokyo Commodity Exchange also climbed to their highest level in more than one week.
Spot gold was little changed at $667.60/668.40 an ounce at 2:51 a.m. EDT, compared with $667.70/668.50 late in New York on Friday, when a jump in stock markets and a drop in the dollar pushed up the metal to its highest since August 15 at $669.10.
Some traders said a sense of caution had crept into the market after gold ended up more than 1 percent on Friday on a rise fuelled by technical, options-related buying rather than fresh news.
Koji Suzuki, market analyst at Kazaka Commodity Co. Ltd., said he believed it was too early to say that the subprime issue and credit worries, which led to a broad sell-off in financial markets, were over.
There is a sense of optimism in the market, but I think it will take a little longer to be able to say the situation has really calmed down, Suzuki said.
Problems in the U.S. housing sector, stemming from the advancing of home loans to people with poor credit history, spread to global credit markets sparking fears of a liquidity crunch.
I think this week we will get a better idea of whether there will be a recovery in riskier assets, he said.
The risk of massive defaults on subprime mortgages and heavy debts now poses a bigger threat to U.S. economic prosperity than terrorism, a panel of U.S. business economists said on Monday.
The conclusion was based on a survey of 258 members of the National Association for Business Economics conducted between July 24 and August 14 and updates one done in March.
Most active June 2008 gold futures on the Tokyo Commodity Exchange rose about 2.1 percent to 2,526 yen, its best level since August 16, before finishing at 2,518 yen, up 43 yen from Friday's close.
The dollar slipped 0.2 percent from late U.S. trade to about 116.20 yen, but still held off a 14-month low of 111.60 yen hit earlier in the month.
The euro was little changed at $1.3670.
The benchmark TOCOM June 2008 platinum contract closed up 51 yen per gram to finish at 4,615 yen, while key TOCOM June 2008 silver contract closed at 450.0 yen per 10 grams, up 13.9 yen.
Platinum was at $1,247/1,252 an ounce, versus $1,243.90/1,250.90 late in New York.
Palladium rose to $327/332 an ounce from $321.50/324.50 late in New York.
Silver was little changed at $11.93/11.98 from $11.93/11.96 an ounce.
In industry news, the Tokyo Stock Exchange plans to list a gold exchange traded fund (ETF) that will be backed by bullion in spring 2008, the Japanese financial daily Nikkei said on Monday.
It said, without citing sources, that the Tokyo bourse is considering listing a gold ETF offered by U.S.-based financial service company State Street Corp. on the New York Stock Exchange.
State Street's StreetTRACKS gold shares in New York, the world's top listed bullion backed ETFs, hold about 515 tonnes of gold on behalf of investors.
Market participants were also waiting for embattled Japanese Prime Minister Shinzo Abe to announce a new cabinet on Monday.
Precious metals prices at 0732 GMT
Last Net Change Pct Move Turnover (lots)
TOCOM Gold 2518.00 43.00 +1.74 73587
TOCOM Platinum 4615.00 51.00 +1.12 37780
TOCOM Silver 450.00 13.90 +3.19 2761
TOCOM Palladium 1244.00 21.00 +1.72 514
Spot Gold 667.40
Spot Platinum 1247.00
Spot Silver 11.93
Spot Palladium 327.00
Change so far in 2007
Metal Latest bid End prev year Pct Move
TOCOM Gold 2518.00 2445.00 +2.99
TOCOM Platinum 4615.00 4254.00 +8.49
TOCOM Silver 450.00 493.30 -8.78
TOCOM Palladium 1244.00 1255.00 -0.88
Spot Gold 667.40 636.10 +4.92
Spot Platinum 1247.00 1132.00 +10.16
Spot Silver 11.93 12.85 -7.16
Spot Palladium 327.00 332.00 -1.51
TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams and spot prices in $ per ounce.