Gold fell 1.5 percent on Friday from its previous session's three-week high, as a rise in the dollar after better-than-expected US existing home sales prompted investors to take profits ahead of the weekend. But traders said the drop would be limited because of firmer oil prices and geopolitical tensions.
Silver and the platinum group metals also followed gold to trade lower. Spot gold hit a high of $664.20 an ounce, before falling to $657.20/656.95 by 2:52 pm EDT (1852 GMT), against $664.60/665.60 in New York late on Thursday. Most-active gold futures for April delivery on the COMEX division of the New York Mercantile Exchange settled down $6.90, or 1 percent, at $657.30 an ounce, traded from $655.20 to $665.30. "The dollar moved after the US housing data and that was bearish for gold. It's profit-taking as well on the moves we have seen recently," said a precious metals dealer in London.
The dollar rose slightly against the euro, after news of a surprise jump in US existing home sales, beating expectations for a decline from the previous month.
Oil rose above $62 per barrel to a three-month high Friday after Iran seized 15 British Royal Navy personnel, raising concerns about renewed tension between the oil-producing nation and the West against the backdrop of the Islamic republic's nuclear dispute with the West.
"You would have thought that might have helped (gold) a bit more, and that might be why crude was up. But I don't think at this point it was enough of a story to move things dramatically higher," said one New York precious metals broker. He said that gold was consolidating after its recent rally as investors took a breather and as the dollar strengthened.
"Even though crude is up, gold can't seem to quite make it back to the unchanged level," he said. Analysts said the decline in gold prices was temporary and the metal was poised to gain in the long run on positive fundamentals.
"Notwithstanding the recent sell-off, fundamentals on the gold market remain supportive to further price rises. However, influenced by the correction, we believe that prices will rise somewhat slower going forward," Calyon Corporate and Investment Bank said in a report.
Sentiment had turned positive after gold broke $650 an ounce last week and stayed above that level, triggering buying by people who had sold the metal to cover losses after a sell-off in global equities in early March.
"Risk markets generally seem to have recovered a long way after the recent concerns they had about the US housing market," said John Reade, head of metals strategy at UBS Investment Bank.
"And if risk markets continue to do well, then the gold price will likely go higher and we are forecasting $700 in one month and $750 in three months. "But I am concerned that if we do get another wobble coming through in equity markets etc, they could put some pressure on gold," he added.
In other metals, silver dipped to $13.17/13.22 an ounce from its Thursday close of $13.41/13.46, while platinum XPT=> fell to $1,229/1,234 an ounce from $1,235/1,240 late in New York on Thursday. Palladium XPD=> was down $1 to $351/356 an ounce compared with its previous New York close on Thursday.