Gold slipped in Europe on Tuesday as buyers took a break after the metal's rally to an 11-month high above $1,000 an ounce last week, but analysts said the metal would stay supported by strong investor interest. However, further stock market weakness in the United States, the world's largest economy, or bad news from the financial sector could spark another sharp rise as investors seek a safe place to put their money.
Spot gold hit a session low of $968.60 an ounce and was at $987.10/989.10 an ounce at 1602 GMT from $990.95 in New York late on Monday. "The banking crisis is continuing, and everyone was hoping we had seen the bottom as far as equities were concerned," said Afshin Nabavi, head of trading at MKS Finance in Geneva.
Traders are eyeing equities after a slide in US stocks to 12-year lows lifted gold to session highs on Monday and falling markets pushed gold over $1,000 an ounce on Friday. Gold's failure this week to revisit last week's highs above $1,000 an ounce has triggered a bout of profit-taking by short-term investors hoping the precious metal would break through last March's $1,030.80 record high.
However, investor interest in physical gold can be seen in holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, which held at a record near 1,029 tonnes on Monday. But it was the SPDR's third straight session without new inflows. "We do not believe this is anything to cause acute concern as we are continuing to see heavy investment demand into physical gold out of our Swiss sales desks," UBS strategist John Reade said.
In supply news, South Africa's Chamber of Mines said the country's total gold mine production fell 13.6 percent to 220,127 kilograms in 2008, and 10.7 percent year-on-year in the fourth quarter. Output had been hit by the impact of the electricity supply crisis early in the year and lower average grades, it said. Among other precious metals, spot silver was at $14.27/14.33 an ounce from $14.41.
Holdings of the iShares Silver Trust, the world's largest silver-backed ETF, rose 2 percent or 153 tonnes to a record 8,180 tonnes on Monday. Spot platinum was at $1,044/1,049 an ounce from $1,071, while spot palladium was at $196/200 an ounce from $195.50. Earlier it climbed more than 5 percent in a correction after the previous session's 8 percent fall.