Tokyo gold futures edged up on Wednesday, reversing the previous day's falls as investors viewed the recent weakness in the dollar and favourable technical as supportive of gold. Platinum futures also wiped off the previous day's losses and neared a record high marked this week. Spot gold was little changed.
It traded at $672.10/673.60 an ounce Compared with $672.30/672.80 late in New York. Key gold futures contract for April 2008 delivery on the Tokyo Commodity Exchange closed at 2,628 yen ($21.84) a gram, up 11 yen or 0.4 percent from Tuesday's close.
The April contract rose as high as 2,634 yen on Monday, reflecting strong interest by domestic investors to buy on dips. The contract hit a one-month trough of 2,586 yen on Friday.
But it has since floated between these two levels given a dearth of major market-moving news. "The market is careful as May is the month when investment funds lock in profits before they close their books," said Naomi Suzuki, senior analyst at Sumitomo Corp.
"But I don't think we should get too much worried about such selling," she said, adding that technical charts suggest an upturned in gold bullion since October last year would warrant its test of $700-$730 by summer.
Spot gold hit a one-month low of $664.00 last on Thursday, when a dollar rally and a sell-off in equity markets helped make investment funds risk-averse and trim their holdings in gold. But the dollar has since weakened versus the euro, and Tuesday's consumer price data suggested US inflation was well-contained and backed a view that the Federal Reserve is likely to cut interest rates this year.
The euro was at $1.3605 in late Tokyo trade, off a one-month low below $1.35 hit last week, and was back towards an all-time high of $1.3683 struck in late April.
A weaker dollar makes gold cheaper for holders of other currencies and boost bullion demand. Benchmark TOCOM April platinum futures finished at 5,021 yen a gram, up 16 yen or 0.3 percent from the previous close.
It had risen as high as 5,030 yen, just shy of a record high for any benchmark of 5,031 yen marked on Monday. Despite a loosening outlook for physical supply, the TOCOM market remained in Backwardation due to hopes of launches of more exchange-traded funds in the future.
Backwardation is a market condition where prices for nearby months are higher than for later months. The nearby June contract was up 26 yen at 5,136 yen. Johnson Matthew, 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, limited stocks and fund buying.
Spot platinum stood at $1,327/1,332 an ounce, slightly lower than $1,330.00/1,335.00 in late New York. Cash palladium traded at $359/363 an ounce, versus $358/362 in New York, while silver inched down to $13.18/13.22 an ounce from $13.21/3.24.