Gold fell more than 2 percent in a broad commodities sell-off on Friday, with a rise in the dollar and softer oil prices dampening the metal's allure as an alternative investment. Other key precious metals, base metals and major soft commodities traded lower, with investors pocketing profits before the end of the quarter.
Gold fell to $926.50 before rising to $933.30/934.20 an ounce at 1540 GMT, against $951.80/952.60 in New York late on Thursday. Last week, it hit a record high of $1,030.80 an ounce before tumbling to a one-month low of $904.70.
"The market is really correcting itself, but it's a general move out of commodities. It's not just gold," said Jeremy East, head of metals trading at Standard Chartered Bank. The market witnessed a heavy sell-off last week before rebounding on technical buying. Now it was witnessing a continuation of the downward trend, with people liquidating their positions and running for cash, East said.
"But I don't think the bullish trend is over. There is still buying interest, but in the short term the market has probably overdone on the upside. We are in a consolidation phase and gold may break back down below $900 again."
The dollar edged higher but hovered not far from record lows against the euro after US data showed inflation pressures were tame in February, affirming expectations of further interest rate cuts by the Federal Reserve to boost a weakening economy.
A firmer dollar makes gold costlier for other currency holders and often lowers demand. Lower oil prices reduce the metal's appeal as a hedge against inflation. Oil fell more than $2 to near $105 a barrel as crude flows through Iraq's pipeline system were restored after disruption by a bomb attack on Thursday.
"I would expect gold to continue bouncing around in the range of about $955 on the upside and down to about $915," said Tom Kendall, metals strategist at Mitsubishi Corporation.
"It's going to take until the second half of the next week before the market is going to be ready to make a more convincing push upward again." US gold futures for April delivery fell $16.6 an ounce to $932.20 - off last week's record of $1,033.90.
Analysts were positive on the metal's outlook in the medium to long term. "The sudden price pull-back across the precious metal complex during March has raised concerns that the bull run in this sector has drawn to a close. We disagree," said Michael Lewis, global head of commodities research at Deutsche Bank.
"We believe weakness in the US dollar has not been exhausted and with US real interest rates expected to move deeper into negative territory, we are maintaining our bullish outlook towards gold and silver prices," he said in a report. In other metals, spot platinum rose to a one-week high of $2,040 an ounce before falling to a low of $1,980. It was last at $2,010/2,020, versus $2,023/2,033 in New York. It struck a record high of $2,290 on March 4 on supply fears driven by mining disruptions in top producer South Africa.
Platinum gained around 50 percent in 2008 after a power crisis in South Africa forced gold and platinum mines to shut down for five days in January, driving platinum prices. But the metal, mainly used in jewellery and auto catalysts to clean exhaust fumes, tumbled to a six-week low at $1,805 an ounce last week. Silver fell to $17.93/17.98 from $18.50/18.55 an ounce - off a 27-year high of $21.24 hit on March 17. Palladium dipped to $439/446 an ounce from $445/450.