LONDON, Oct 4: Europe gold nudged higher on Tuesday and was seen trading in a range, with inflation worries and good physical demand supporting prices, traders said. Market players are looking for a clear direction to trigger the market either way in the short term, but are generally bullish and expect gold could touch the psychologically important $500-an-ounce level in the coming months.

Spot gold fetched $467.00/467.75 a troy ounce by 1045 GMT, up from $465.80/466.50 last traded in New York. The metal had surged to a near-18-year high of $475 on Sept. 22.

“I am hoping to see a bit more interest as the marriage season picks up in India. That should give some support,” said a precious metals trader in London.

Physical buying in India, the world’s largest gold consumer, surges in the festival season that peaks in November. Demand in the Middle East, another big consumer, should also pick up at lower price levels, traders said.

Gold prices could come under pressure if funds decided to start liquidation. The US currency’s strength was also seen negative for dollar-priced gold, they said.

There is a chance it could get pushed lower but I think lots of funds have taken a fundamental view on the inflation, the trader said.

The investment fund long position in COMEX gold futures hit a record high last week, according to Commitments of Traders data from the Commodity Futures Trading Commission on Friday.

The non commercial net long position rose to 166,100 contracts as of Sept. 27, from 158,126 lots a week earlier.

While we continue to favour a correction in gold due to excessive positioning, one risk to that view would be further increase in inflation expectations, said John Reade, analyst with UBS Investment Bank.

With gold now in the fourth quarter, buying from the physical sector is expected to be strong and will prevent gold from free-falling should the fund take a profit. The Bulliondesk.com said in a report.

Spot silver followed gold and rose to $7.39/7.42 an ounce from $7.37/7.40 last traded in New York.

Platinum traded at $919/924 an ounce, versus $924/928, while sister metal palladium flat at $192/195. —Reuters