Gold futures in New York slipped but ended above three-week lows on Friday, hit by fund and speculative selling in choppy trade, analysts said.
Most other precious metals also posted losses, though silver ultimately regained the $12 an ounce mark in the afternoon. Palladium closed lower after rising to a 2-1/2-month peak the prior day.
TheBullionDesk analyst James Moore said that an apparent easing of worries over "terrorist threats" and geopolitics, coupled with less oil-led inflation concerns, look set to keep gold on the defensive in the near-term and could even spark a test back to the psychological $600 level.
"Buying interest should be strong, however, with bargain hunters, physical players and investors keen to buy dips," he said in a note late in the day. December delivery gold on the New York Mercantile Exchange's Comex division fell $3.50 or 0.58 percent, to $621.70 an ounce, within a range of $628.80 and $616.50 its cheapest level since July 24.
Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois, said funds were trimming positions in gold because prices had failed to advance in the week.
Softer oil prices and thinner-than-usual trading due to summer vacations exacerbated the move lower, he said. "It's just continued liquidation." Kaplan pegged support at $615, the low from July 24. Traders put resistance up at $650 and $670 an ounce. Spot gold last changed hands at $611.80/612.60 an ounce, versus on Thursday's late New York quote at $615.10/5.85. On Friday's afternoon fix in London was at $613.90.
"We began to get concerned when (bullion broke below) $627 this week, and rightly so, for gold has fallen rather materially and very consistently" since then, said Dennis Gartman, author of The Gartman Letter investment report. "Any rallies are to be used to lighten up into," said Gartman, who has been long-term bullish on gold recently.
Spot gold is likely to stay above $600 through the rest of 2006 with moderate physical demand supporting the market, industry experts said at a Mumbai seminar on Friday.
"Now the market is getting more stable and we are coming back to normal status," said Yuichi Ikemizu, head of precious metals trading and marketing at Mitsui Commodity Risk Management of Japan. Ikemizu saw gold probably trading from $600 to $670 until December and expected Indians to be happy to buy around $600.
On the economic front, the University of Michigan's preliminary August consumer sentiment index fell to 78.7 from 84.7 in the final reading of the July index on Friday.
Expectations for inflation one year out rose to 4.2 percent from 3.2 percent, and were the highest since October 2005. The dollar was choppy after the sentiment report, with the euro trimming gains to hold at $1.2815 in late trade. A firmer dollar frequently caps purchases of dollar-denominated assets like gold in overseas markets.
Oil was stuck near $70 a barrel, limiting investment demand for gold as an inflation hedge. Comex September silver rose 3.5 cents to $12.03 an ounce, trading from $12.14 to a three-day low of $11.86. Spot silver rose to $12.01/12.11 an ounce, compared with $11.94/12.04 late on Thursday. On Friday's fix was at $12.01. Nymex October platinum was down $9.70 at $1,223.60 an ounce. Spot platinum fetched $1,207/1,213. September palladium fell $1.55 to finish at $334.30 an ounce.
On Thursday, futures shot to $341.50 a peak since June. Spot palladium ended at $329/334.