Gold extended losses to fall more than 3 percent on Wednesday as investors appetite for risk sharpened after positive US economic data. Spot gold tumbled to a six-week low of $882.90 an ounce and was at $889.10/890.70 an ounce at 1547 GMT from $914.20 late in New York on Tuesday, while silver slid 5 percent to a six-week low of $12.07 an ounce.
US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange fell $27.40 to $889.40 an ounce. "The safe haven appeal (of gold) is diminishing," said Heraeus precious metals trader Alexander Zumpfe. HSBC analyst Jim Steel told Reuters the data, "combined with the recovery of risk appetite... would be negative for bullion." Traders are awaiting the conclusion of the US Federal Reserves two-day policy meeting later in the session.
Investors often borrow yen to invest in other higher yielding, riskier assets. Prices are also being pressured by the growing tide of scrap metal returning to the market, as consumers are tempted to sell old jewellery by high prices and pushed to raise cash by the faltering economy.
US hedge fund Paulson & Co showed its confidence in the gold sector with the purchase of a $1.3 billion stake in the worlds third largest gold miner, AngloGold Ashanti, from mining group Anglo American. AngloGold, which focuses on South Africa, produced 4.982 million ounces of gold last year. "The very fact that Paulson has made this move is going to prompt other hedge funds to look at why, and what the merits of following that with similar purchases are," said Fairfax analyst John Meyer.
"AngloGold is deep-level, higher-cost, quite highly leveraged gold mining, with good liquidity and good scale," he said. "(Paulson) clearly feel that gold is going to strengthen." Among other precious metals, spot silver was at $12.17/12.24 an ounce from $12.70, tracking gold.
Spot platinum slid to $1,035.50/1,045.50 an ounce from $1,043.50, while spot palladium was at $191.50/195.50 an ounce from $191.50. Zurich Cantonal Bank (ZKB) said on Wednesday its platinum ETF holdings have risen 22 percent since early February to 160,800 ounces. Investors have bought heavily into precious metals-backed ETFs in recent months as they seek a haven from volatility in other asset classes.