Gold slipped on Wednesday, paring early gains, as the dollar recovered lost ground versus the euro, denting interest in the metal as a hedge against weakness in the US currency. Spot gold was bid at $976.3 an ounce at 1533 GMT, against $980.85 an ounce late in New York on Tuesday. US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange fell $7 to $976.20 an ounce.
Michael Blumenroth, a trader at Deutsche Bank, said the firmer euro had prompted some profit taking. "We don't see much physical demand or demand from exchange traded funds," he said. "At the moment there is more speculative money coming into the gold market, and that enters the market pretty quickly and comes out of the market pretty quickly as well."
The dollar rebounded from its lowest level this year versus the euro after sources told Reuters a downgrade in US sovereign credit ratings would not discourage Asian central banks from buying US Treasuries. Elsewhere, holdings of the SPDR Gold Trust exchange-traded fund were at record levels on Tuesday, while ETF Securities said holdings of its Gold Bullion Securities ETF rose more than 7,000 ounces that day.
Gold demand in India, the world's biggest bullion consumer, stayed weak on Wednesday as high prices dampened buying interest. Commerzbank trader Rory McVeigh said the precious metal was likely to encounter heavy resistance on its way up to the key $1,000 an ounce mark. Gold's record high lies just above that level at $1,030.80.
"The problem is that these are speculative longs, and as we get towards $1,000 an ounce, you will get waves of selling as people take money off the table," he said. Silver was at $15.77 an ounce against $15.94. The world's largest silver exchange-traded fund, the iShares Silver Trust, said its holdings dipped by 3.11 tonnes on Tuesday, but remain near record levels.
Spot platinum was bid at $1,249 an ounce against $1,238.50 late in New York on Tuesday, while spot palladium was at $246 against $246.50. Both remained depressed by the lacklustre outlook for the car industry, consumer of around half global supply of the metals. Data released on Tuesday showed US auto sales fell nearly 34 percent in May from a year earlier, but aggressive discounting helped steady results.
"Although US auto sales remain weak, data for May showed some improvement from April, which we believe helped support platinum group metals prices," said HSBC in a note. "Even a mild upturn in auto demand may spur the PGMs to rally further, as production cutbacks have reduced supply."
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