Tokyo gold futures edged down on Wednesday as a slight recovery by the dollar against the yen prompted profit taking, but were supported as uncertainty ahead of the US presidential election drew safe-having buying.
Gold futures on the Tokyo Commodity Exchange (TOCOM) were also under pressure as the spot price drifted from a near 16-year peak set earlier in the week. "The market appeared to be lightening positions as the spot price failed to sustain $430, but I don't think gold will fall sharply," said Shoji Sugata, assistant manager at Mitsubishi Corp Futures Ltd.
TOCOM's new benchmark gold contract for October 2005 delivery, which was listed on the exchange on Wednesday, closed at 1,463 yen per gram after trading between 1,463 and 1,468.
Other contracts closed down two to nine yen. Spot bullion was quoted at $425.50/426.25 an ounce, down from $428.25/429.00 in late New York. Gold hit a six-month peak at $430.20 an ounce on Monday.
But long position holders have been unwinding some of their positions after bullion failed to sustain that level.
"The dollar needs to fall further before hedge funds return to build new positions actively again," said a commodities section manager at a Japanese trading house.
"The dollar recovered from lows, but its sentiment still looks weak, which should support gold," he said.
The dollar gained some support on Wednesday as the euro was hurt by a downbeat outlook for European growth and comments from European officials expressing concerns about the Europe's gains. The dollar rose as high as 107.13 yen on Wednesday. It slipped to a six-month low of 106.22 marked on Monday. The euro fetched $1.2755. It was off from an eight-month peak of $1.2841 scaled on Tuesday.
German Chancellor Gerhard Schroeder said he had discussed the "worrying" euro/dollar exchange rate relationship with French President Jacques Chirac.
The euro was also hurt after the European Commission said the balance of economic risks for the coming two years had shifted to the downside and that further sharp euro gains, which could put the brakes on exports, would make matters worse.
TOCOM platinum drifted down in line with gold prices. Platinum has been struggling amid views that Japan's export-led economy could be undermined by an excessively strong yen, which could depress share prices and cut demand for the metal mainly used in catalytic converters to remove pollution from car exhausts.
The new benchmark platinum contract closed at yen at 2,852 yen per gram after trading between 2,841 and 2,863. Others closed down 13 to 41 yen. Below are closing prices for TOCOM's most active precious metals contracts, with the day's turnover for each metal.