Spot gold prices pushed above a psychological threshold of $1,300 a troy ounce on Monday, buoyed by a weak dollar and investment inflows. Gold rose to $1,302.13 a troy ounce, up 0.7% from the previous close. The precious metal had hovered close to the psychological mark earlier this year, but failed to gather enough momentum as profit-taking set in. The recent weakness in the dollar has combined with investment inflows to give gold an extra push, said Eugen Weinberg, analyst at Commerzbank. Gold usually has an inverse correlation with the dollar, the currency in which it is priced internationally. A weaker dollar usually makes gold cheaper to buy for consumers outside of U.S., in countries such as China and India. The dollar weakened at the end of last week following the decision by the Bank of Japan to keep monetary policy unchanged as well as disappointing first-quarter gross domestic product out of the U.S. However, the rally in gold could come under renewed pressure as safe-haven demand for the metal is waning and equity markets are in better shape, says Mr. Weinberg. Analysts say the key factor that will determine the direction of gold prices is any indication from the U.S. Federal Reserve on when it might shift monetary policy and tighten rates. Prices of silver also rose strongly in line with gold. Spot silver rose to an intra-day high of $17.936 a troy ounce, before edging down to $17.88 a ounce, 0.4% higher than the previous close. Analysts say silver's fundamentals might be stronger than gold as the white metal often doubles up as an industrial metal. In recent weeks, industrial metals such as copper have gained strongly on signs of better demand from China.
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