* Dollar softens, oil climbs as world stocks hit 2009 highs
* Bernanke testimony eyed for impact on currencies
(Updates prices, adds comment)
By Jan Harvey
LONDON, July 21 (Reuters) - Gold firmed on Tuesday, building
on the previous session's gains, as rising equity markets and an
above-consensus reading of U.S. economic activity from the
Chicago Fed pressured the dollar.
Oil prices also lent support to gold, climbing more than $1
a barrel after world equities' rise to a 2009 high boosted hopes
for an economic recovery. Rising crude prices can fuel demand
for gold as a hedge against oil-led inflation. []
Spot gold <XAU=> was bid at $952.80 an ounce at 1311 GMT,
against $948.35 an ounce late in New York on Monday. U.S. gold
futures for August delivery <GCQ9> on the COMEX division of the
New York Mercantile Exchange rose $4.70 to $953.50 an ounce.
The dollar <.DXY> slid to fresh six-week lows against a
basket of six major currencies on Tuesday as U.S. stock futures
extended gains after better than expected results from
industrial group Caterpillar Inc <CAT.N>. []
Gold is often bought as an alternative asset to the dollar
and moves in the opposite direction to the U.S. currency.
"The most noticeable change for gold has been the stronger
correlation with the dollar," said Standard Chartered analyst
Daniel Smith. "We went through a stage when the correlation was
negative and now it's pretty strongly positive."
On the wider markets, world stocks hit nine-month highs as
traders anticipated more good news from corporates. []
The markets are awaiting Federal Reserve chairman Ben
Bernanke's congressional testimony later in the day. Bernanke
will begin his twice-yearly testimony at 1400 GMT.
INFLATION FEARS
A firmer tone to stocks and rising oil prices fuelled fears
over the prospect of inflation further down the line, which may
prompt fresh buying of gold.
French bank Calyon <CAGR.PA> said it forecasts gold prices
to average $935 an ounce this year, rising to $975 in 2010 and
$1,025 in 2011, with the price rise driven by dollar weakness
and sharp gains in inflation. []
"The two primary drivers we see pushing gold higher are a
weaker dollar... and massive injections by central banks of
liquidity to support economic growth," said Calyon metals
analyst Robin Bhar.
"This unconventional monetary policy is inflationary."
With physical demand for gold from both jewellers and
investors still sluggish over the seasonally weak summer months,
traders awaited fresh direction from the currency markets.
Gold prices in India, the world's largest bullion market,
were flat as dealers awaited lower prices. On the investment
side, holdings of the largest gold ETF, the SPDR Gold Trust
<GLD>, were unchanged on Monday. [] []
"When we get towards the end of August and September, we
will see physical demand picking up ahead of Diwali and the
wedding season," said Barclays Capital analyst Suki Cooper.
Silver <XAG=> was at $13.68 an ounce against $13.62,
platinum <XPT=> was at $1,177 an ounce against $1,180, and
palladium <XPD=> was at $254 from $252.
South African miner Impala Platinum <IMPJ.J> said a shaft at
its Rustenberg mine will remain shut while an investigation into
an accident is carried out. All nine employees trapped by a rock
fall at the mine on Monday were killed, it said. []
Traders are awaiting the outcome of a dispute between South
Africa's National Union of Mineworkers and mining companies over
wages. Final talks are taking place on Tuesday. []
(Additional reporting by Pratima Desai; Editing by William
Hardy)
