New York gold and platinum futures finished lower on Tuesday after they climbed to record highs in the overnight sessions, as investors locked in profits ahead of the US Federal Reserve's rate-setting decision.
Top platinum and gold producers in South Africa said they would be back to production soon after a power crisis forced miners in the minerals-rich country to stop operations last week. Precious metals prices fell on the news. "It's strictly profit taking. Angloplat is still down, and they may be down for a while.
So the market is still likely to test the highs," said Ralph D'Esposito, a Nymex platinum group metals floor trader in New York. The active Nymex April platinum settled down $6.80 at $1,721.90 an ounce, after rising to a fresh record high of $1,734.90 overnight. Spot platinum was quoted at $1,705.00/$1,710.00. Anglo Platinum (Angloplat) the world's biggest platinum producer, said on Tuesday it was looking at all options on how it could work within the constraints of 90 percent of its normal power supply.
Dealers said that news of supply shortage in an already tight market sparked strong interest by funds and speculators in the white metal. "Yesterday we saw additional fresh longs into the market. I think you will likely to see a pretty good increase in open interest today," D'Esposito said.
South Africa's state power firm promised on Tuesday to boost supplies this week to mines crippled by outages, but warned it would soon have to start rationing electricity.
"Profit taking has emerged since the European opening as some mine operations resumed production. However, the loss of several days' output in an already under supplied market will continue limit price weakness short-term," James Moore, analyst with TheBullionDesk.com in London told clients in a note.
"However, the recent events may have a much more damaging impact on the platinum market longer-term, as industrial end-users seek cheaper and more sustainable alternatives," Moore said.
Meanwhile, market watchers said that lower gold jewellery buying from top bullion consumer India could potentially weigh on prices. "To the extent that we have seen the primary Indian demand slumping and scrap sales rising globaly We must have sustained very strong investment demand to continue at these levels," Jon Nadler, senior analyst at Kitco Bullion Dealers in Montreal.
The active gold contract for February delivery at the Comex division of the Nymex settled down $2.00 at $925.10 an ounce, after rising to a record peak of $933.30 initially.
"Short-term gold is vulnerable to pockets of profit taking. However, given the concerns regarding the health of the US economy and the prospect of lower interest rates, dips will continue to find good volumes of buying interest," Moore said.
Some bullion investors opted to stay on the sidelines ahead of the Fed's rate decision. Markets are betting that the Fed will cut interest rates by 50 basis points after the two-day policy meeting ending on Wednesday, following last week's hefty 75-basis-point cut in a rare move between scheduled meetings. The dollar edged up against the euro after a mixed bag of US economic data led dealers to trim bets ahead of the Fed meeting.
A higher dollar makes gold, which is denominated in the US dollar, more expensive for investors holding other currencies. Comex estimated 1:00 pm (1800 GMT) gold futures volume at 245,081 contracts, while gold options at 14,840 lots.
Total turnover in Chicago Board of Trade electronic 100-oz gold futures was 29,724 lots at 2:12 pm. Total open interest of Comex gold futures totalled 526,113 lots as of Monday, down 11,318 lots from Friday. At 2:15 pm, spot gold was quoted at $928.60/929.30 versus on Monday's New York close of $927.50/928.20. London bullion dealers fixed the afternoon spot reference price at $924.50.
Comex March silver finished up 5.0 cents at $16.800 an ounce, after trading in a range from $16.570 to $16.905 a contract high. Spot silver was at $16.68/16.73, compared with its last on Monday quote of $16.67/16.72. London silver was fixed at $16.75. March palladium reversed initial losses to end $1.95 higher at $393.30 an ounce and spot palladium was pegged at $389.00/$392.00.