LONDON, June 23: Gold climbed in Europe on Monday as rising oil prices fuelled buying of bullion as an inflation hedge.

Gains were capped, however, by a firmer dollar in the wake of soft European economic data.

Gold rose to $903.65/904.65 an ounce from $901.35/902.75 late in New York on Friday.

Oil tracked higher over the weekend as traders speculated a promised output hike from Saudi Arabia would fail to outweigh falling production from Nigeria, and amid geopolitical tensions.

We expect high oil prices will bring higher investment into gold, said Commerzbank analyst Eugen Weinberg.

The inflationary pressures we are seeing around the world will keep pushing investors into gold, because gold is seen as a safe haven against inflation.

Gold’s resilience after pushing above $900 an ounce last Thursday is also positive from a technical point of view, he added.

On the fundamental front, news that Australian gold production has fallen by a greater-than-expected 7pc in the last year is also encouraging buying, analysts said.

Australia is the world’s third-largest producer of gold behind China and South Africa. Its output is estimated at 231 tons in the year to June 30, against 249 tons the year before.

Margins for gold producers are below that for other types of mines effectively diverting capital into other metals, he said in a research note.

However, gains in the gold price were capped by a rally in the dollar, which ticked up against the euro after weak European economic data.

Short-covering ahead of this week’s Federal Reserve decision on interest rates also benefited the dollar, analysts said.

A softer dollar typically benefits gold, as it is bought as a hedge against weakness in the US currency. A weaker greenback also makes dollar-priced gold cheaper for holders of other currencies.

The Fed’s Open Market Committee is holding a two-day meeting to set rates from Tuesday.

Among other precious metals, spot platinum rose to $2,060.00/2,070.00 an ounce from $2,048.50/2,068.50 late in New York.

Palladium edged up to $472.00/477.00 an ounce from $469.50/477.50 an ounce, while silver was little changed at $17.38/17.43 an ounce from $17.36/17.43 late in New York.

—Reuters