Gold hovered below a multi-year peak in Asia on Monday while palladium, a metal used in jewellery and auto catalysts, rose to its highest level in 18 months on gains in Japan.
Spot gold edged down to $485.00/485.50 an ounce in trade from $485.40/486.20 last quoted in New York, pausing for breath after rising to $488.70 on Friday its highest in nearly 18 years on fund buying.
Weakness in Tokyo gold futures put some pressure on the market but gold would find support at around $480 an ounce with investors likely to buy on the price dips, dealers said.
Gold has seen a surge in investor interest as fund managers diversify into precious metals. Dealers said an expected rise in demand for jewellery and investment in the run-up to Christmas could push up gold to $500 by year-end, a level last seen in 1987.
Platinum fell to $973/977 an ounce from $979/982 late in New York, and off a near-26-year high of $992 hit last week. Sister metal palladium rose to $262 an ounce in Asia, its best level since May 2004, before easing to $260/264, down from $261/265 late in New York.
But fund buying in palladium futures in Tokyo Commodity Exchange would support the spot market. Key October 2006 contract rose to as high as 1,020 yen per gram, its highest since April 2004, on renewed buying interest from the funds.
Yukuji Sonoda, a precious metals analyst at Daiichi Commodities in Tokyo, said spot palladium would breach an April 2004 high of $280 by the end of this year as fundamentals turned bullish for the white metal.
"Within this year, it's clear that palladium prices will be over $280," he said. Precious metal refiner Johnson Matthey said last week the surplus of palladium supply over demand was expected to fall by more than 50 percent to 650,000 ounces in 2005 from the previous year because of a 6 percent rise in demand to 6.89 million ounces.
Purchases of palladium by China for jewellery manufacture are projected to soar to 1.2 million ounces this year, up 71 percent over the previous year, it said. Thinly traded silver eased to $8.02/8.04 an ounce from $8.04/8.06 late in New York.
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