Gold fell nearly 2 percent in Europe on Thursday as disappointment over its failure to hold above $900 an ounce and the dollar's turn higher against the euro sparked fund selling of the precious metal. A recovery in the stock markets is also denting interest in bullion as a haven from risk, traders said.
Spot gold was bid at $882.65 an ounce at 1252 GMT, against $897.60 an ounce late in New York on Wednesday. Afshin Nabavi, head of trading at MKS Finance SA, said gold had been pressured by the lack of a break above resistance at $900, a decline in the euro and firmer stock markets. "We are still trading in a range of $880-$900," he said.
The dollar recovered early losses against the euro on Thursday, with the US currency turning positive against the euro after US weekly jobless claims fell 14,000 last week. Gold is often bought as an alternative asset to the US currency, and usually moves in the opposite direction to it. Global stocks touched a four-month high on Wednesday on hopes for an improvement in the US economy.
European shares rose as a wave of blue chip earnings boosted optimism. A recovery in the equity markets has pressured gold, as investors sell the precious metal to buy stocks. Hopes the downturn may be bottoming out are likely to continue boosting equities, further weighing on gold, analysts said.
The Federal Reserve said after a meeting on interest rates on Wednesday the US economic contraction seemed to be slowing, cheering traders even as data showed the world's largest economy shrank sharply in the first quarter. "Any more positive economic sentiment will put downward pressure on gold again, at least in the short term," Societe Generale metals analyst David Wilson said.
On the demand side, the World Gold Council reported Indian gold sales ahead of the key festival of Akshaya Tritya earlier this week were down 8 percent from a year ago, much higher than estimates from a local trade body and jewellers.
On the investment side, holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, were unchanged for a fourth session on Wednesday. The trust's gold assets have fallen 23 tonnes month on month, against a rise of more than 98 tonnes in the preceding four weeks. Losses in gold pressured other precious metals, with silver slipping more than 2 percent to $12.37 an ounce against $12.76.
But ETF Securities said holdings of its silver-backed exchange-traded commodity rose 250,000 ounces or 1.4 percent on Wednesday. Elsewhere, spot platinum was bid at $1,088.50 an ounce against $1,094.50, while palladium was bid at $220 an ounce against $215.50, pressured by the drop in gold. Platinum dropped into negative territory amid news that US carmaker Chrysler will proceed with Chapter 11 bankruptcy protection.