``We've seen some pretty phenomenal physical demand from India, which has limited gold's downside potential,'' said James Moore, a Kettering, U.K.-based analyst with TheBullionDesk.com. The dollar's fall is also pushing gold higher as investors seek an alternative investment, he added.
Gold futures for December delivery rose $7.10, or 1.2 percent, to $595.40 an ounce on the Comex division of the New York Mercantile Exchange. The $12.40 gain for the week was the biggest since the five-day period ended July 28 and ended two weeks of declines. Prices are down 19 percent from a 26-year high of $732 on May 12.
Gold for immediate delivery rose $5.35, or 0.9 percent, to $589.54 an ounce as of 8:27 p.m. in London time. The metal is up 1.6 percent this week, after falling 7.4 percent in the past two weeks.
Gold Demand
Demand for gold fell 16 percent in the second quarter, the third straight quarterly decline, as higher prices deterred jewelers. Gold futures are up 27 percent from a year ago. Purchases by jewelers accounted for 73 percent of demand last year, according to the producer-funded World Gold Council.
Indian jewelers have started buying again to stock up for sales during the country's wedding and festival season, and before year-end holidays around the world, Moore said. The wedding season starts at the end of month.
Gold prices ``will bounce again,'' after an annual deadline for European Central Bank sales expires at the end of September, Peter Hambro, founder and chairman of Peter Hambro Mining Plc, said yesterday. The company is Russia's third-biggest gold miner.
Under the Central Bank Gold Agreement, banks in Europe agreed to sell no more than 500 tons in the year ending September. They've sold 380 tons as of Sept. 19, the London- based World Gold Council said.
Gold ``is still a bit at risk of further pressure,'' Moore said. ``There is potentially more metal coming onto the market.''
