Gold eased 1 percent on Thursday as the precious metal struggled to maintain its recent gains in the face of a firmer dollar versus the euro, with an early bounce in European stock markets also pressuring prices. Spot gold was quoted at $848.80/850.80 an ounce at 1408 GMT, down from $854.05 an ounce late in New York on Wednesday. Earlier it touched a low of $842.95.
US gold futures for February delivery on the New York Mercantile Exchange fell 80 cents to $849.30 an ounce. "Gold profited from safe-haven buying from investors switching out of bank stocks, out of gold, and (worried by) developments in Europe," said Dresdner Kleinwort consultant Peter Fertig.
Gold climbed 1.5 percent in the first three sessions of the week, with strong demand for coins and bars and physically backed products such as exchange-traded funds fuelling gains. But its failure to hold onto gains has tempered enthusiasm for the metal, analysts said. "Gold has been failing to hold on to its gains beyond $855," said Pradeep Unni, senior analyst at Richcomm Global Services.
"It seems uncomfortable holding higher with dollar continuing to trade firm," he said, adding "Gains seen over the last two days have been purely supported by fresh asset allocation and investment demand." But while jewellery buying is weak, demand is strong for small investment products such as coins and bars, traders said.
"As in October and November, since the beginning of the week we have seen strong investor demand for physical gold," said MKS finance head of trading Afshin Nabavi. "There has been demand for physical kilobars and coins." Interest in physically backed products such as exchange-traded funds - which issue securities backed by physical stocks of gold - has also soared.
The world's largest bullion-backed ETF, New York's SPDR Gold Trust, said its holdings rose to a record 805.96 tonnes on Wednesday. In Europe, Zurich Cantonal Bank said holdings of its gold-backed ETF have risen by 9 percent or 283,000 ounces since the end of November. Among other precious metals, silver edged down to $11.28/11.36 an ounce from $11.31 an ounce. Platinum remained broadly rangebound, building a base below $1,000 after sharp falls in the later part of 2008.
Prices plummeted from a high of $2,290 an ounce in March as investors worried about the outlook for demand from carmakers, which account for around half of global platinum consumption. Platinum was at $928/933 an ounce, little changed from $923.50 late in New York on Wednesday, while palladium was at $182.50/186.50 an ounce, down from $183.50.