By Matt Day     Of DOW JONES NEWSWIRES  

NEW YORK (Dow Jones)--Gold futures Wednesday climbed to their highest levels in almost two weeks, supported by sustained physical buying and speculation about stronger demand from an expanded Chinese market.

The most actively traded contract, for December delivery, rose $16.20, or 1.4%, to $1,203.70 an ounce on the Comex division of the New York Mercantile Exchange.

Prices have advanced for five straight sessions, lifted by bargain buying, investor confidence in commodities and a return of some refuge investment by market participants worried about the viability of the economic recovery. Gold is sometimes bought on the belief that it holds its value better than other assets during economic turmoil. U.S. equities haven't shown consistent direction in the last two weeks as investors weigh the impact of largely mixed economic data, leading to increased attention to gold as a hedge.

Physical demand boosted gold Wednesday, as buyers in Asia who entered the market when prices fell below $1,180 an ounce continued to show interest in the metal, said Standard Bank analyst Walter de Wet. Bargain buying has provided a floor under gold prices during recent pullbacks, and analysts say physical interest should continue, supported by a seasonal boost in demand from India, the world's largest gold jewelry market. Indian consumers use gold for decoration and investment purposes.

Gold was also lifted by bets that a shift in Chinese policy toward gold trading would boost that country's demand for the metal. The People's Bank of China said Tuesday that the government would increase the number of commercial banks allowed to import and export gold.

Investors have watched for clues about changes in the Chinese gold market as the fast-growing economy matures. China doesn't officially disclose imports of gold bullion, but speculation about the country's central bank or other financial institutions changing their asset allocation in precious metals can lead to price swings on the futures market. China is the world's largest producer of gold.

-By Matt Day, Dow Jones Newswires; 212-416-4986; matthew.day2@dowjones.com

Source: http://online.wsj.com/article/BT-CO-20100804-710741.html