Gold and silver prices hit one-month lows on Wednesday as softer oil prices and a rise in the dollar against the euro triggered profit-taking, analysts said. The metals pared losses by afternoon trade in New York but remained vulnerable to technical selling, they said.
"The dollar has been a bit strong and oil prices have been weak. A combination of these factors is prompting some profit-taking," said John Reade, head of metals strategy at UBS Investment Bank.
"Further short-term declines in gold cannot be ruled out." Spot gold fell as low as $667.30 an ounce before rising to $672.40/672.90 by 3:22 pm EDT (1922 GMT), against $673.70/674.20 in New York late on Tuesday. Most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange settled down $2.20 at $675.10 an ounce, traded from $670.00 to $677.90.
The dollar edged up against the euro in morning trade. A higher greenback makes dollar-denominated assets like gold more expensive for investors holding other currencies. US crude futures closed down 1 percent, falling toward $63 a barrel. Gold is generally seen as a gauge against oil-led inflation.
"The gold market is long and I don't think investors are very keen to get short the market here," said David Holmes, director of precious metals sales at Dresdner Kleinwort. He said the current weakness was another downward phase and prices might decline a little bit further, but ultimately, institutional investors would come in to pick up the metal.
Metals markets watched a strike in Peru, which is among the world's top two silver producers, and is No 3 in copper and zinc and No 5 in gold. As a nation-wide mining strike went into its third day on Wednesday, Peruvian miners and government officials met for intensive talks aimed at ending the walkout this week.
Barrick Gold Corp, the world's biggest gold producer, reported a first-quarter loss as it took a $557 million charge to exit hedge positions and take advantage of strong gold prices.
The platinum market ignored market talk that another exchange-traded fund (ETF) based on physical metal might be launched in the United States. Platinum was up $2 at $1,285/1,289 an ounce against its previous close in the US market. "The oil industry and the car industry are very important politically (in the United States). It's very difficult to believe that the Securities and Exchange Commission would contemplate approving a platinum ETF without allowing a period of comment," said Reade of UBS.
London-based ETF Securities launched physically backed ETFs based on platinum, palladium, gold and silver in London last week. Zurich Cantonal Bank's plans to launch ETFs in platinum, palladium and silver by May 10.
"The Silver ETF finally got approved in the United States, so theoretically at least it's possible. Is the market big enough for that? I don't think so," said Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Germany's Heraeus.
Silver touched $13 an ounce, the lowest since April 2, and was last quoted at $13.20/13.23, against its previous finish of $13.24/13.27 in the US market. Palladium was up $2 at $368/372 an ounce compared with its last quote in New York on Tuesday.