Gold turned lower early on Tuesday, retreating from an initial rally, as solid gains in US equities and an improving economic outlook weighed on the metal's safe-haven appeal. Palladium and platinum rose on better demand expectations after data showed the US services sector expanded in January, while European business optimism hit an eight-month high.
Bullion rose earlier in the session after data showed Hong Kong's net gold flow to mainland China jumped 47 percent in 2012 to a record high. The report was consistent with latest data showing renewed gold interest among central banks such as Russia, South Korea and other emerging economies.
"Central banks have been buying gold for months now, and we (gold futures) really haven't moved. To me it's bearish, as I would think that we should be much higher," said COMEX gold options floor trader Jonathan Jossen. Spot gold was down 0.1 percent to $1,672.20 an ounce by 1:20 pm EST (1820 GMT), retreating from a high of nearly $1,685 earlier in the session.
US gold futures for April delivery were down $3.30 to $1,673.10. Signs that the euro zone economy is stabilising also pressured gold. The Markit's Eurozone Composite PMI data showed a rise to a 10-month high in January, and the encouraging US service-sector data also drove investors to the equity markets and out of gold, analysts said. Gold investors are now digesting a report that the fiscal 2013 US budget deficit will dip to $845 billion after four straight years of $1 trillion-plus deficits, data from the Congressional Budget Office showed.
Spot silver edged up 0.4 percent to $31.85. Platinum and palladium both rose for a third day on Tuesday, with dealers expecting further gains in coming months as hopes for improvement in macro-economic data encouraged fund buying in the autocatalyst metals.
An improving global economic outlook and persistent supply disruptions in South Africa, the world's largest supplier, have helped both platinum and palladium to outperform gold and silver so far this year. Palladium reversed early losses to rise 1.3 percent to $764.97, setting a fresh 17-month high of $766.22. Platinum was up 0.5 percent at $1,701 an ounce.
Switzerland's net exports of platinum more than tripled and of palladium jumped more than 50 percent in 2012, data from the Swiss customs bureau showed on Tuesday. Switzerland is a major refining and trading hub for the platinum group metals. Analysts, however, warned of still patchy platinum group metals (PGMs) demand, with continued weakness in the European market offsetting improvements in the United States and China.
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