Gold and platinum slipped on Wednesday as investors booked profits ahead of an interest rate decision by the US Federal Reserve, which may determine the direction of the precious metals market.
Spot gold fell to $921.75/922.45 an ounce from $928.60/929.30 an ounce in New York on Tuesday, when the metal rallied to another record high of $933.10 on expectations of more rate cuts in the US and fears about South African output.
Analysts said sentiment was bullish, with gold already rising 11 percent in 2008, after a jump of 32 percent last year, as investors bought the metal on uncertainty in the dollar's outlook, record high crude oil and turmoil in financial markets.
"You couldn't rule out the possibility of gold moving higher in the next few days. Possibly to $930 or above that level," said David Moore, a commodity analyst at the Commonwealth Bank of Australia.
"I would hesitate to say though that we've seen a consolidation in the gold price. In the current environment, I think it's likely to remain volatile." Platinum dropped to $1,686/1,693 an ounce from $1,705/1,710 an ounce late in New York.
The metal spiked to an historic high of $1,735 an ounce on Tuesday beefore profit taking kicked in Dealers said supply concerns persisted even though South African miners planned to resume production on Wednesday after the state power firm promised to boost to boost supplies this week to mines crippled by outages.
"We've seen Japanese speculators selling back gold and platinum. But I guess sentiment is still in a bullish trend despite the current correction," said a dealer in Hong Kong. "I think gold may trade within a range of $919 to $930 ahead of the Fed. Of course nothing happens in the physical market," said the dealer, referring to the absence of purchases from jewellers due to high prices.
The Fed is widely expected to follow up last week's emergency 75 basis point rate cut, its biggest in a quarter century, with another cut of 25 or 50 basis points after a two-day meeting ending later on Wednesday. A rate cut tends to weaken the dollar as investors look for alternative assets, including gold, for higher returns.
The euro edged down to $1.4765, while the dollar dipped to 106.75 yen as investors awaited the Fed's verdict on interest rates to fight against the threat of a US recession this year. Investors are also keeping an eye on this week's Opec meeting in Vienna, where the group was expected to leave production levels unchanged. Crude oil gained for the fifth straight session to more than $92 a barrel on Wednesday.
The benchmark gold futures contract on the Tokyo Commodity Exchange ended 6 yen per gram lower at 3,182 yen, tracking a weaker cash market. Comex's February gold futures gave up gains after surging to record highs of $933.30 in overnight trade.
Silver fell to $16.61/16.66 an ounce from $16.68/16.73 in New York off on Tuesday's 27-year high of $16.80 an ounce. Palladium dipped to $386/390 an ounce from $389/392 an ounce.