The news of lower bullion demand from top consumer India due to near-record prices took a toll on sentiment of US gold futures early on Tuesday, but higher flight-to-quality and investment buying remained supportive to the futures market.
Platinum contracts resumed their rally toward the historic $2,000 mark, reaching a record high for the ninth consecutive session, and continued to be driven by fears of a huge market deficit.
India's Bombay Bullion Association said on Tuesday that gold imports in January slumped to just five tonnes from 62 tonnes in the same month a year ago as a surge in prices saps demand in the world's largest consumer. George Nickas, broker with FC Stone in New York, said that sharply reduced gold jewellery demand from India could weigh on bullion, although the market could be sustained by investors buying gold as a safe-haven investment.
At 11 am EST (1600 GMT), the gold contract for April delivery at the COMEX division of the NYMEX was down $5.80 to $920.90 an ounce amid light volume, trading between $915.50 and $928.50. Meanwhile, the news of lower gold supply because of mining operation issues in top producer South Africa could boost bullion prices.
South African gold output fell 6.5 percent in 2007 compared with 2006 in volume terms, while total mineral production fell by 0.2 percent compared with the previous year, official data showed on Tuesday. Spot gold was quoted at $917.50/918.40, versus Monday's New York close of $922.70/923.40. London bullion dealers fixed the afternoon spot price at $917.00.
Platinum futures rallied toward the $2,000 level on the back of strong fund buying, as lingering supply concerns in top producer South Africa continued to support prices in an extremely tight market. The active NYMEX platinum contract for April delivery was up $12.60 to $1,952.00 an ounce. In overnight trade, the April contract had reached an all-time peak of $1,970.90.
Spot platinum fetched $1,943/1,950. For sister-metal palladium, the NYMEX March contract was down $6.05 or 1.4 percent to $437.35 an ounce. Spot palladium fetched $434/437 an ounce. COMEX March silver was up 1.5 cents to $17.485 an ounce, trading between $17.335 and $17.650. Spot silver was at $17.45/17.50, compared with its last Monday quote of $17.47/17.52. London silver was fixed at $17.46.