Gold fell to around $1,130 per ounce on Friday as a dollar rise dampened investor sentiment, but palladium hit a 18-month high on strong investment demand related to the US exchange traded funds.
Gold ended the week lower as news of China's tightening bank-lending requirement earlier this week curbed economic optimism, decreasing gold's inflation hedge appeal. Bullion rose 4 percent in the first week of the year. Spot gold was at $1,128.20 per ounce at 1:34 p.m. EST (1834 GMT), compared with $1,142.15 quoted late in New York on Thursday.
US February gold futures settled down $12.50, or 1.1 percent, at $1,130.50 an ounce on the COMEX division of NYMEX. On the regulation front, gold market participants were fairly sanguine about the US Commodity Futures Trading Commission proposal of new measures to rein in speculation in energy and commodity trading, especially oil.
Some analysts see gold and silver as harder targets for the commission. Separately, the London Metal Exchange said it will offer clearing for gold over-the-counter contracts in London by the second half of 2010. Palladium and platinum were supported by strong investment demand from the launch of a new exchange-traded fund (ETF) backed by the metals in New York.
A US subsidiary of London's ETF Securities launched the products last Friday. "Palladium's on fire mainly because of this US ETF," David Thurtell, analyst at Citi said. "It's raised fears there'll be a bit of a shortage of metal this year, if investors are absorbing a lot of supply."
The US platinum and palladium ETFs were met with strong buying interest, with nearly 200,000 ounces of metals added by its first full trading week. Palladium traded at $449.50 versus $441.50. The metal earlier hit $451 per ounce, its highest since mid-July 2008. Spot platinum was at $1,594 after rising as high as $1,618.50, and compared with $1,607 in New York. Silver traded at $18.38 from $18.64.
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