Tokyo gold futures edged up on Tuesday as traders adjusted their positions ahead of a Federal Open Market Committee meeting, with the metal gaining overall support as investors seek an alternative to the fragile dollar.
Sentiment for gold was supported as the US currency fell after former Federal Reserve Chairman Alan Greenspan warned investors to expect "a few years of dollar weakness".
Traders wanted to keep their positions light as they were looking ahead to the outcome of the FOMC meeting later in the day as a hint to determine the outlook for the dollar and gold. "Considering a narrowing of the interest rate gap between the United States and Europe, the dollar is likely to stay bearish against the euro. The general weakness of the dollar should support gold," said Hisaaki Tasaka, a market analyst at Ace Koeki.
"For now, the dollar's movement is the key focus of the gold market," he said. The FOMC is widely expected to leave the federal funds rate unchanged at 5.25 percent, and given the note of caution on inflation sounded recently by a number of Fed officials, markets expect the post-meeting statement to again echo this concern. Key Tokyo Commodity Exchange gold for October delivery closed the session up 14 yen or 0.6 percent at 2,388 yen a gram.
It moved in range of 2,386 to 2,390 yen Cash gold edged up in Asia as traders covered sell positions ahead of the FOMC meeting. Gold was little changed at $629.00/630.50 an ounce from $629.20/630.70 late in New York. Gold briefly climbed as high as $630.30 on Tuesday.
On Monday, it fell to a three-week low of $622.60 before rebounding as physical buyers reappeared at lower levels. But gold gained support as the dollar extended losses against the euro on Tuesday after Greenspan's comments. The euro rose to $1.3254/56 from around $1.3235 in late US trade. The dollar slipped to 116.76/80 yen from 117.00 yen.
Greenspan told a business conference in Tel Aviv via a video-link from Washington: "I expect that the dollar will continue to drift downwards until there will be a change in the US balance of payments."
A weaker dollar has also made gold seen as a currency alternative more attractive for investment funds. TOCOM platinum futures extended gains on technical buying following sharp falls last week. Traders were keen to buy the white metal on dips after seeing strong bids by Chinese buyers when the cash price fell below $1,100 an ounce.
October TOCOM platinum futures reached a session high of 4,190 yen a gram, up nearly 4 percent since falling to a one-month low of 4,040 yen on December 7. October platinum ended the session up 17 yen or 0.4 percent at 4,167 yen. Cash platinum was little changed at $1,111/1,116 an ounce against $1,110/1,115 in New York.