Gold touches two-week peak

Gold extended its recovery on Monday, touching the strongest in nearly two weeks as the dollar weakened, the Chinese yuan rebounded and some investors reversed their bearish gold bets. Spot gold was up 0.7 percent at $1,262.86 an ounce by 0945 GMT, its highest since June 26.

US gold futures for August delivery rose 0.7 percent to $1,264.20 an ounce.

There has been a strong correlation recently between the yuan and gold, analysts said.

“I think most likely the yuan will remain volatile but (I don't expect ...) aggressive weakness, so that means the only thing that is driving gold at the moment is the dollar, which is somewhat weaker,” said Georgette Boele, commodity strategist at ABN AMRO in Amsterdam.

The yuan rose half a percent in offshore markets to 6.6292 against the dollar, further away from the lows hit in June - its biggest ever monthly fall -, while the dollar index weakened.

A weak US dollar makes greenback-denominated gold cheaper for holders of other currencies.

OCBC analyst Barnabas Gan said some investors had bought gold to cover their short positions.