Gold held above $400-an-ounce in Asia on Tuesday, as it tracked a weaker dollar and factored in a new agreement reached by Europe's central banks on gold sales.
Palladium climbed to its highest level in more than a year before retreating, while silver hovered just below a six-year high of $7.04 an ounce hit on Monday as speculators sought to diversify out of volatile gold.
"(Gold) is up a little bit on the euro picking back up through $1.24 this said Martin Mayne, associate director at N M Rothschild in Sydney.
"The next resistance level is 405 and it seems we are getting support just below $400," he added. Spot gold was trading at $402.25/403.00 an ounce, versus $400.45/405.15 in New York on Monday, after European central banks said gold sales would be capped at 500 tonnes a year for the next five years, up slightly from the expiring pact's 400-tonne limit.
The benchmark February 2005 gold contract on the Tokyo Commodity Exchange (TOCOM) lost two yen per gram to 1,436 yen.
Silver was trading at $7.02/7.04 an ounce, up from $6.96/6.98 in New York, with key resistance pegged at $7.05 and support at $6.50.
Some dealers said silver, used in electronics and photography, looked overbought and a lack of liquidity meant the metal was prone to a technical correction.
"Prices at these levels are difficult to justify on a fundamental basis.
As 2004 progresses, rising copper, zinc, lead production will see a significant increase in supply of silver," Commonwealth Bank of Australia said in a report.
"With increasing popularity of digital photography, the demand for silver is relatively poor," it said.
The dollar slipped against the euro on lingering disappointment after on Friday's weak US payroll data quashed hopes for a full-fledged recovery in US employment.
The euro was quoted at $1.2439 in Asian afternoon trade.
Currency movements influence dollar-denominated gold. Gold touched a 15-year peak of $430.50 an ounce on January 6 when the euro hit a lifetime high against the dollar.
Palladium rose to a high of $264 an ounce, the metal's highest level since February 2003, on renewed market talk that car manufacturers were switching to the cheaper metal.
It later came off to $256/261 against $259.50/265.50 in New York. "I think it's more a case of speculation this car substitution. That's an ongoing process.
What we've seen in recent weeks is speculative buying," said one dealer in Hong Kong. Sister metal platinum was at $895/900 an ounce, compared with $892/897 an ounce in New York.
Both palladium and platinum can be used for automobile catalytic converters to clean exhaust fumes.