Gold prices slipped on Friday as fears of financial meltdown receded, but analysts say investors expecting only a brief respite from the maelstrom will carry on piling into the precious metal. Traders said short term investors selling their holdings ahead of a US holiday on Monday weighed on gold.
Firmer equities and news that the United States was working on a programme to subsidise mortgages for homeowners before they fall into loan arrears also hit gold market sentiment. Rising hopes of financial stability prompted a bout of profit-taking which took spot gold to a session low of $931.40 an ounce.
At 1527 GMT it was at $932.70/934.70 an ounce from $945.05 late in New York on Thursday. " A lot of bad news, for this week at least, seems to have been priced in," said Michael Widmer, analyst BNP Paribas. The escalating crisis in the banking sector has pushed up gold prices by about 40 percent since late October last year.
"The bull case for gold is that it is a safe haven," said Tom Gidley-Kitchin, an analyst at brokers Charles Stanley. Higher prices are reflected in the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust. The fund's holdings reached a record above 970 tonnes as of February 12, a 30 percent jump since the end of October.
"This means that SPDR's gold holdings are now close to the level of those of the world's sixth largest holder of gold, the Swiss National Bank, which held 1,040 tons of gold in its vaults at the end of December," Commerzbank said in a note.
"The Perth Mint reports an unprecedented demand for gold in the last three months, mainly from US investors. According to the Mint, the value of the gold holdings by investors had doubled in the past year to comfortably over $2 billion."
Total exchange traded product holdings have risen at their fastest ever rate so far this year, growing by 200 tonnes to almost 1,400 tonnes, Barclays Capital said in a note. "Prices continue to appreciate steadily, but what really stands out is the dramatic increase in appetite for physical gold among investors." Benchmark gold futures eased 1.5 percent to $935 an ounce. The contract hit a record $1,050 in March 2008.
Spot gold too hit a record - $1,030.80 - last March. Many now expect investment demand to help push prices towards these levels. Others think a new record could be set should inflation take off next year because of the large amounts of money being pumped into the global economy by central banks and governments to boost growth and confidence. Spot platinum, tracking gold, also slipped to $1,051/1,061 an ounce from $1,073 an ounce on Thursday.
Deteriorating sales and bleak prospects in the auto sector have contributed to platinum's fall in recent months. Latest data showed a 27 percent collapse in car registrations in Europe last month. The metal used in autocatalysts to clean car emissions is expected to stay under pressure. Palladium was at $212/216 an ounce from $213.50 and silver at $13.30/13.38 from $13.46 on Thursday.
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