Tokyo gold futures slipped on Tuesday as falls in oil prices and the dollar-based spot price in New York prompted sales from investors, but a weaker yen versus the dollar provided a cushion for the yen-based yellow metal.
Sentiment for gold was bullish, with plenty of bargain-hunters buying on dips as inflation concerns remained despite the recent drop in oil prices.
"Profit-taking by funds pushed down gold, but the underlying bullish sentiment has not changed," said Koji Suzuki, market analyst manager at Star Asset Securities.
"I think falls in gold will be limited as funds still believe that gold is an attractive alternative investment instrument." Benchmark October TOCOM gold closed at 1,757 yen per gram, down six yen or 0.34 percent from Monday's close.
It had moved in a range of 1,750 to 1,758 yen. Other contracts closed down two to six yen. TOCOM gold gained support as the yen dropped to a two-year low against the dollar ahead of a Federal Reserve meeting, where the central bank is widely seen raising interest rates.
The Fed.'s policy decision and statement will be released. The Japanese currency was trading at 116.55/59 against the dollar after dropping as low as 116.68, the lowest since September 2003, in the day.
A weaker yen raises the value of yen-based gold. Spot gold rebounded to $466.25/467.00 an ounce from $464.80/465.60 an ounce last quoted in New York on Monday, when it fell more than $8.
It was around $472.50 about 24 hours ago. "Gold will need more correction, probably to around $450-$455, before fresh bids emerge again," said a senior trader at a Japanese trading house.
"But I don't think the price will fall to that level as there are plenty of bargain-hunters willing to buy on dips. Sentiment in the market is still strong."
Crude oil prices were drifting lower amid unusually mild temperatures in the US Northeast, increasing views that demand for heating oil would fall.
On Monday, key Nymex crude futures settled at $59.76 per barrel the lowest settlement since July 27. Distant TOCOM platinum futures fell in line with gold but held above a closely watched support level.
Key October platinum closed down seven yen, or 0.2 percent, at 3,457 yen per gram. It had moved in a range of 3,447 to 3,466. October platinum was well supported on active bargain hunting below 3,450 yen. The two front contracts rose by 13 and two yen, while the rest closed down three to six yen.
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