Interest in gold softened on Wednesday as investors paused for more definitive reasons to keep buying after four straight sessions of gains, but the stronger euro and a bullish price outlook from metals consultancy GFMS provided support.
"The market tone is a bit better, but we have had a bit of risk-back-on in the last day or two. So, I think that is hurting gold somewhat," said Peter Buchanan, senior economist at CIBC World Markets in Toronto. On the positive side, he added, "We're still doubtful the Fed is going to pull the trigger on QE3, even with the soft US payrolls," he said, referring to the central bank's quantitative easing via Treasury security purchases.
"Though there are some hints that the ECB might do their version of (economic stimulus). So, that's probably supporting sentiment," Buchanan said of the European Central Bank. Spot gold was off 0.2 percent at $1,656.99 an ounce by 12:49 EDT (1649 GMT). US June gold futures slipped 40 cents to $1,660.30.
"The broader macro environment still remains positive. In the near term, the floor will be set by a combination of how strong investment demand is and how responsive the physical market is," said Suki Cooper, a precious metals analyst at Barclays Capital.Investment in gold has cooled. Speculators cut their ownership of US gold futures by more than a quarter since late February, although holdings of the metal in exchange-traded funds remained near the record high above 70 million ounces.
Metals consultancy GFMS, a unit of Thomson Reuters, said in its annual outlook for the gold market that a record high price above $2,000 an ounce next year could mark the peak of the precious metal's bull run of more than decade, as monetary policy in major economies starts to tighten.
For now, gold could drive above $2,000 on concerns over the euro zone debt crisis and the idea of more US monetary easing, GFMS Chairman Philip Klapwijk told Reuters. On the demand side, Hong Kong's gold exports to China rose 20 percent in February, as appetite for the precious metal remained strong there.
"On the public level, China's central bank will continue to accumulate gold, which is easier than liberalising their capital account and currency," said Jeremy Friesen, a commodity strategist at Societe Generale. Silver fell 0.9 percent to $31.49 an ounce, pushing the number of ounces of metal needed to buy one ounce of gold up to 52.5 from 50 just one week ago, reflecting gold's relative out performance.
Platinum and palladium were lower, with platinum down 0.5 percent at $1,583.99 an ounce and palladium off 0.6 percent at $632.97 an ounce. Earlier, data showed car sales in China cooled in March, following sharp gains in February. That weighed on palladium in particular.
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