Gold prices softened on Wednesday, but got support from a weaker dollar and higher crude oil prices after gasoline stocks fell in the United States. Spot gold was slightly lower at $683.25/683.75 an ounce at 1600 GMT compared with $684.10/684.60 late in New York on Tuesday, when it hit a session low around $680.
It slipped on Tuesday as oil prices fell and investors sold ahead of the expiry of May silver and gold options - contracts that allow the holder to buy or sell the underlying instrument at a fixed price - in New York.
News that sales of new US homes rose 2.6 percent, below forecast, saw the dollar reverse early gains and head back towards record lows against the euro. "The dollar has been the main thing behind gold's move this afternoon, and US gasoline stocks fell," a London-based trader said. "If the dollar falls to new record lows, we could see gold trying the $690 level again." Gold on Monday matched a 11-month high of $693.60 set last week, but stalled on market nerves about breaching the psychological $700 level.
Weekly data showed stocks of gasoline in the United States fell 2.8 million barrels ahead of the peak driving season. Gold often rises with oil prices because it is seen as a hedge against inflation, while a falling US currency makes dollar-denominated metals cheaper for holders of other currencies.
Earlier, a surprisingly strong US durable goods orders report for March briefly boosted the dollar, which pushed gold down towards its session low of $682.30. Analysts expect gold to be firmly underpinned by strong physical buying interest over the next few days. "Physical activity is strong in the mornings and has offset long liquidation in the afternoons," said Frederic Panizzutti, analyst at MKS Finance.
"Physical demand is likely to remain strong, but the market needs a catalyst to move prices much higher." Also supportive were comments by a Chinese central bank official, who said the country should put its $1.202 trillion of foreign exchange reserves to better use by ploughing more money into gold, oil and metals.
"(The) comments have potential importance for gold," HSBC said in a research note. HSBC added that the launch of platinum and palladium-based exchange traded funds had triggered a bout of profit-taking in the two metals.
However, consultants GFMS said platinum may hit a record high of $1,450 an ounce this year on bullish sentiment and a weak dollar and analysts say the new ETFs are likely to boost platinum prices in the longer term.
"If the platinum ETFs take more than about 500,000 ounces ... of platinum out of the market then we would expect a material and sustained tightening of platinum forwards and much higher prices," UBS said in a note.
ETF Securities launched physically backed ETFs based on platinum, palladium, gold and silver in London on Tuesday. This follows Zurich Cantonal Bank's plans to launch ETFs in platinum, palladium and silver by May 10.
Silver gained to $13.80/13.83 an ounce from $13.78/13.81 late in New York on Tuesday and platinum was down at $1,303/1,305 an ounce from $1,315/1,320. Palladium was a touch softer at $378/383 an ounce from $379/384.