Gold prices changed course to move higher in late European business on Tuesday as a drop in the dollar after the release of US core consumer price data prompted investors to buy bullion.
But platinum was mostly flat after the release of UK refiner Johnson Matthey's forecast on Monday of a supply surplus this year, although the market was very subdued due to the annual Platinum Week event in London.
Gold fell as low as $664.50 before rebounding to $671.00/671.50 an ounce at 1430 GMT, against $668.20/669.70 late in New York on Monday. Michael Widmer, metals analyst at Calyon Corporate and Investment Bank, said gold was supported by the US data as the Federal Reserve would move closer to lowering interest rates as the upward pressure on consumer prices subsided.
"The decline in interest rates should in turn be negative for the dollar and hence put further upward pressure on gold." The dollar fell against the euro after the core consumer price data met expectations.
A weaker dollar makes gold cheaper for holders of other currencies and boosts bullion demand. But Barclays Capital saw prices sliding in the near term. "In the short term we still look for gold to move lower and consolidate before resuming its upward trend," it said in a daily report.
Silver was at $13.20/13.23 an ounce, against New York's previous $13.11/13.16. Johnson Matthey, the world's largest platinum distributor, said in its Platinum 2007 report, released on Monday, that the market was expected to be in surplus for the second year in a row in 2007. But the refiner also said the metal, used mainly in autocatalysts and jewellery, might set a new peak of $1,400 an ounce over the next six months given investor interest in exchange-traded funds (ETFs), limited stocks and fund buying.
Platinum was at $1,320/1,325, little changed from its previous $1,317/1,321. "While these are the first surpluses since 1998 and could be viewed as a trigger for weaker prices, we doubt that investors will care much as the news flow on demand is very positive, the potential for further supply interruptions remains high and investment demand could potentially lift platinum to a new record," John Reade, metals analyst at UBS Investment Bank, said in a commentary on the Johnson Matthey report.
Reade was, however, wary of the large speculative long positions that had built up on futures markets in New York and Tokyo. He said they left the market vulnerable to price declines if investors judged ETF inflows to be disappointing or if broader asset markets experienced another correction.
"The extent of the long positions in platinum makes the metal more-than-normally susceptible to quick tests of the downside," he added. Palladium ticked up to $358/362 an ounce, having earlier matched Monday's five-week low at $355 and versus New York's $356/360.