September 27, 2006	Wednesday	Ramazan 3, 1427

LONDON, Sept 26: Gold advanced more than one per cent on Tuesday tracking higher crude oil prices, but traders remained cautious in chasing prices higher ahead of the release of key US data.

The dollar's sideways movement and gold's inability to break important price levels also made people nervous, dealers said.

It looks like there is still some profit taking each time we move closer to $600 an ounce. Should we be able to keep the upside momentum and break the level, then we would see renewed interest from investors and speculative buyers, said Frederic

Panizzutti, analyst at MKS Finance.

On the physical front, gold demand is very sound in various regions. It's still going on and we expect physical demand to remain sound for the coming days, he added.

Gold hit a high of $593.75 an ounce, its highest in nearly two weeks, and was quoted at $589.30/590.30 by 0954 GMT.

That was higher than $586.20/587.20 in New York late on Monday.

Bullion has rebounded nearly 4pc since falling to a near three-month low of $571.20 on Sept. 15.

The yellow metal is not out of the woods yet though, particularly with gold's recent correlation with oil, and remains vulnerable to bouts of fund liquidation, said James Moore.

Oil held above $61 a barrel after rebounding from a six-month low as speculators fear a deepening fall could prompt Opec to rein in output.

Higher oil prices often elevate gold's appeal as a hedge against inflation. Expectations among investors that the US

Federal Reserve will keep interest rates on hold also contributed to Tuesday's rebound in gold, dealers said.

The market awaits a blast of US data that will help to gauge the US interest rate outlook. The consumer confidence data from the Conference Board will be released on Tuesday, while the personal consumption expenditure index — the Fed's favourite measure of inflation — would be out later this week.

We expect the rebound of crude to be short-lived, the long-term downward trend should continue. The economic data today might strengthen the dollar, putting additional pressure on gold, Dresdner Kleinwort said in a daily note.

Dealers kept a watch on gold sales by central banks. The second year of the European Central Banks Gold Agreement ends on Tuesday and some analysts estimated a total sales of more than 380 tons during the year against the full quota of 500 tons.

In other precious metals, silver edged down to $11.19/11.26 an ounce from $11.22/11.29 in the US market.

Platinum was flat at $1,129/1,134 an ounce, but palladium rose to $317/322 an ounce from $312/317.

In industry news, Russia's gold output in the first eight months of 2006 declined 0.4 per cent year-on-year to 101.69 tons from 102.10 tons, the main industry lobby said.—Reuters