Gold fell on Thursday to a 13-month low as the strong dollar curbed demand for bullion as an alternative investment, but pared losses as the US currency slipped to session lows against the euro and oil firmed. Platinum and palladium also dropped on worries over demand from automakers who use the metals to make catalytic converters.
Spot gold was quoted at $721.15/723.65 an ounce at 1521 GMT, against $727.65 late in New York on Wednesday. Earlier it touched a low of $697.45, its weakest since September 2007. US COMEX December gold futures fell $11.50 to $723.50 an ounce. Matthew Turner at commodity analysts VM Group said gold had been outperforming most metals because of its perceived safe haven value, but that some investors were now selling.
"Gold seems like it has slightly caught up with the other commodities," he said. The dollar hit a fresh two-year high against the euro as worries over the outlook for the global economy sparked a flight to safety among investors. However, it later turned negative against the euro as firmer US stocks prompted some profit taking, allowing gold to recover some lost ground.
Firming oil prices are also supported gold. Crude rose more than $2 a barrel as investors bet on a output cut from oil cartel Opec at Friday's emergency meeting. However bullion remains under pressure from fears over falling demand from India, the world's biggest consumer of physical gold. "Industry analysts have reported the demand for gold during the build-up to the Indian festive season has been muted when compared to previous years," Credit Suisse said in a note.
Turner said in local currencies, prices for Indian consumers have not fallen much but that recent price swings were a factor. "Volatile prices can be negative for demand," he said. Gold prices have gyrated in recent months as financial markets have slumped. The World Gold Council said price volatility spiked in the third quarter, rising to 39 percent from 23 percent the quarter before.
PLATINUM TUMBLES
Platinum slid more than 7 percent to its session lows, extending losses that have seen prices fall by half since early August, as the firm dollar added to pressure on prices. The white metal has already been hit by fears over falling demand from carmakers, who account for half of platinum use. Fears over the outlook for the automotive sector were fuelled by reports that General Motors Corp will begin involuntary layoffs of salaried workers.
"Recession fears are especially showing in the auto sector, where we have seen a slowdown in car sales," said Commerzbank analyst Barbara Lambrecht. "These recession fears are especially putting pressure on platinum." However analysts say the platinum sell-off is likely to reverse in the medium term as supply concerns return.
Anglo Platinum, the world's number one supplier, said its output fell 11 percent in the third quarter, but kept its annual production target unchanged despite falling prices. Spot platinum was quoted at $798.50/822.50 an ounce. Earlier it touched a low of $781, its weakest since July 2004.
Its sister metal palladium edged down to $170.50/174 from $173.50. Silver bucked the trend to strengthen, climbing to $9.74/9.82 from $9.50 as firm Indian demand supported prices. Investment demand for the metal is also strong. The iShares Silver Trust, the world's largest silver backed ETF, said its holdings stood at a near-record 6,895.58 tonnes on Monday, the last day for which figures are available.
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