US gold futures finished a tad lower in heavy, choppy trade on Tuesday as initial support from rising crude prices and follow-through buying in the Asian markets diminished and bullion investors locked in recent profits.
"We seem to be under a little pressure again. But the market's stable, with some fund buying again and just some profit-taking keeping the market from climbing," said Carlos Perez-Santalla, a floor trader for Hudson River Futures in New York. Most-active December gold on the COMEX division of the New York Mercantile Exchange settled down 20 cents at $762 an ounce.
In early electronic trade, December gold rose as high as $772 an ounce on strong crude and robust buying by Japanese investors prompted by a higher yen versus the dollar. The contract hit a session low of $758.20.
Oil surged more than $2 to a record $88.20 a barrel on tight supplies, strong demand and tension in northern Iraq because of a possible Turkish military operation against Kurdish rebels. US crude finished up $1.48 at $87.61 a barrel.
Gold is usually seen as a hedge against inflation, while the precious metal often rises with geopolitical tensions as it tends to act as a safe haven in times of crisis.
Bill O'Neill, partner of commodity consultant LOGIC Advisors in Upper Saddle River, New Jersey, cited inflation fears due to record energy prices for bullion's recent strength in spite of gold's slight decline on Tuesday. December gold surged more than $120 to Tuesday's high of $772 from a low of $651.60 on August 16.
"As long as oil trades above $85 a barrel without damaging the global growth (at higher prices), gold would continue to gain on inflationary fears," Pradeep Unni, assistant vice president of Vision Commodities in Dubai, said in a client note.
The dollar rose against the euro on Tuesday as investors grew cautious of risky trades amid a sell-off in global equities and a surge in oil prices. The dollar initially sold off after a report showed a record net capital outflow in August, but recouped some of its losses.
COMEX estimated final volume at 140,628 contracts, and gold options were estimated at 18,528 lots. Turnover in Chicago Board of Trade electronic 100-oz gold futures was 31,543 lots at 2:51 pm EDT (1851 GMT) http://www.cbot.com/cbot/pub/page.
On central-bank gold sales, gold and gold receivables held by euro zone central banks fell by 108 million euros to 185.975 billion euros in the week ending October 12, the European Central Bank said on Tuesday. Gold holdings fell because of sales by two euro zone central banks.
In investment news, India's largest mutual fund, Reliance Capital Asset Management Ltd, launched an exchange-traded fund that would invest in physical gold. Sources told Reuters that the Shanghai Gold Exchange, China's largest precious metals bourse, will launch forward gold contract trading for retail investors after failing to get approval for futures trading.
At 2:15 pm, spot bullion was quoted at $758.10/758.90, down slightly from the New York Monday close at $758.20/759.00. London bullion dealers fixed the afternoon spot reference price at $756.75.
Platinum futures dropped, despite supply concerns due to a possible work stoppage by South African mine workers. South Africa's Solidarity union said wage talks with platinum producer Lonmin had bogged down after it rejected the company's latest offer.
NYMEX January platinum closed down $1 at $1,422.40 an ounce. Spot platinum was quoted at $1,410/1,415. December palladium dropped $1.85 to end at $375.30 an ounce. Spot palladium fetched $365/370. COMEX December silver finished down 19.7 cents or 1.4 percent at $13.658 an ounce, trading between $13.60 and $14.09. Spot silver was quoted at $13.57/13.62, which was lower than Monday's late New York quote of $13.77/13.82. London silver was fixed at $13.66.