Gold slipped in Europe on Friday as the dollar firmed, dampening the momentum which has lifted prices more than 9 percent this month after reports of central bank gold buying. Spot gold was bid at $1,139.50 an ounce at 1614 GMT, against $1,143.50 late in New York on Thursday. US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange fell $1.30 to $1,140.60.
India's acquisition of 200 tonnes of bullion from the IMF boosted interest in gold earlier this month. The impetus from the move pushed gold through key technical resistance levels, taking gold to a record $1,152.75 an ounce on Wednesday. The metal may be due a correction after this month's sharp price rise, analysts said, but in the longer term it is likely to resume its climb.
"The perception is very positive now because of central banks buying gold, but they are buying it off the market. It doesn't change global holdings of the central banks," said Wolfgang Wrzesniok-Rossbach, head of sales at Heraeus. Prices are being capped by strength in the dollar index which firmed 0.48 percent on Friday as investors shed riskier investments.
"The dollar index is hovering above the 75 zone and that strength is keeping the lid on gains," said Pradeep Unni, senior analyst at Richcomm Global Services. Analysts said gold was likely to take support from interest in the metal as a hedge against inflation, which some fear will hit the markets longer term as a result of money flooding into economies via quantitative easing.
Andrew Cole, manager of the Baring Multi Asset Fund, told Reuters on Thursday that gold could hit new highs this year and next as investors look for an inflation hedge. Though some analysts have said such buying of gold is premature, J.P. Morgan commented that "with respect to golden portfolio protection; remember the time to purchase insurance is before your house catches fire."
Silver was at $18.28 an ounce against $18.51. Metals consultancy GFMS said on Thursday the metal may rise above $20 an ounce as surging investment more than offsets a drop in fabrication demand. Platinum was at $1,433.50 an ounce against $1,441.50, while palladium was at $360.50 against $366. Fellow platinum group metal rhodium rose to a fresh 13-month high of $2,675 an ounce on Friday, lifted by speculative demand in anticipation of a bounce in car sales.
Ruthenium meanwhile jumped 23.5 percent to $105 an ounce, tracking gains in other platinum group metals this year, as investors sought out hard assets. "The other platinum group metals have been moving very sharply, and ruthenium didn't move with them," said a minor metals trader. "There is a general flight of money into metal... people feel paper is going to be worth less."
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