Tokyo gold futures backed off on Tuesday as the spot price ran out of steam after the dollar regained some ground versus the yen and as oil prices fell from record highs, but sentiment for the yellow metal stayed bullish.
Precious metals drew safe-haven interest amid uncertainty about the outcome of the US presidential election next week. "Today's drop was mainly caused by falls in (dollar-based) spot prices, but sentiment is bullish," said Tadashi Hashimoto, general manager at Nissho Iwai Futures.
"Precious metals should draw strong safe-haven demand until we know the results of the presidential election."
The benchmark August gold contract on the Tokyo Commodity Exchange (TOCOM) closed down 2 yen per gram at 1,472 yen.
The prompt October contract expired at 1,469 yen, also 2 yen lower than on Monday's settlement. Other contracts closed down 3 to 7 yen. Precious metals were mostly under pressure as spot gold drifted off a high above $430 per ounce hit the previous day.
Spot bullion was quoted at $427.00/7.75 an ounce against $428.25/9.00 in New York. Gold hit a six-month peak at $430.20 an ounce on Monday.
The yellow metal continued to draw demand as a hedge against inflation with oil prices staying buoyant.
The dollar tumbled to fresh eight-month lows against the euro on Tuesday, down for a 10th straight day on worries about the US economy and gaping trade deficit.
Analysts said the dollar was under pressure from a range of factors, including uncertainty about the election and comments from European officials that suggested they were comfortable with a higher euro.
The euro, which has gained close to 5 percent in the past three weeks, rose as high as $1.2842.
The dollar was little changed at 106.72 yen against a six-month low of 106.22 marked on Monday.
It has slipped about 4.5 percent against the yen in little over three weeks. "As long as the dollar is bearish, precious metals will be supported, but a sharp drop could raise concerns about the domestic economy," Hashimoto said.
Japan's export-led economy could be undermined by an excessively strong yen, which could depress share prices and cut demand for precious metals for industrial use.
TOCOM platinum dropped as the strength of the yen induced profit taking by yen-based investors.
But the trend stayed bullish given the overall optimism in the precious metals market.
Sentiment was supported after the prompt October contract expired above 3,000 yen, traders said.
The key August contract closed down 19 yen at 2,877 yen. Others closed down 7 to 24. Below are closing prices for TOCOM's most active precious metals contracts, with the day's turnover for each metal.
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