Gold slipped nearly 2 percent on Tuesday as the dollar bounced back on a US Federal Reserve warning on the currency, and oil prices fell about $2 a barrel. Fed Chairman Ben Bernanke issued a rare warning on the inflationary risk posed by a weak dollar but said US interest rates were well positioned for an economy facing both price pressures and threats to growth.
Spot gold fell as low as $875.10 an ounce and was quoted at $881.30/882.30 at 1426 GMT, versus $891.25/892.65 late in New York on Monday. Earlier it touched an intraday high of $897.10 an ounce.
"The underlying fundamentals are still positive, but gold's upside is capped by this strength in the dollar. Don't expect gold to move too much out of the trading range we have seen in the past week," said Daniel Hynes, strategist at Merrill Lynch.
"We have seen pretty strong support around the $870 level and buying coming back quite strongly by investors and physical buyers," he said adding the chance of prices falling sharply below the level was less likely.
Data from the Istanbul Gold Exchange showed Turkey's gold imports reached 19.4 tonnes in May after dropping off sharply in the two previous months as high prices hit sales. However, in the first five months of the year, imports are still well down on the previous year, off 28.8 percent at 52.7 tonnes. South Africa's Chamber of Mines said the country's gold output fell 15.6 percent to 52,228 kg in the first quarter of 2008, against the fourth quarter of 2007, due to a power shortage.
Platinum fell to $1,987/2,007 from $2,000/2,020 an ounce, but was seen underpinned by supply concerns, after Aquarius Platinum said on Monday that a strike at its Everest mine would cost the producer some 1,300 ounces of metal.
Platinum spiked to a new all-time high earlier this year amid fears of electricity shortages in South Africa, the world's largest producer, would cause a major supply shortfall. Palladium was at $429/437 an ounce, down from $431/439, while silver fell to $16.71/16.76 an ounce from $16.81/16.87 late in New York on Monday.