Gold prices slipped on Monday as stock markets bounced, denting the precious metal's appeal as a haven from volatility in other markets. Nonetheless, prices are within sight of the seven-week high they hit on Friday, with analysts expecting concerns about inflation and the economy to underpin the precious metal's credentials as a hedge against uncertainty.
Platinum rose after refiner Johnson Matthey released its influential annual report, which highlighted expectations of strong Chinese jewellery demand, outweighing weakness in North American and European jewellery markets, traders said. Spot gold was bid at $921.50 an ounce at 1544 GMT, compared with $930.70 late in New York on Friday.
US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange fell $8.60 to $922.70 an ounce. A higher opening by US stocks eroded gold market sentiment. "Gold is tracking equities inversely," said Citigroup analyst David Thurtell. The relationship between the two was "holding solidly for now", he said, "and is likely to do so while confidence is still fragile."
However, analysts said the impact of firmer equities was likely to be brief. Gold is still within reach of the high of $933.65 it hit on Friday, its firmest in seven weeks, after data showed US core inflation in April rose more than expected.
"The outlook for gold is a lot better than the outlook for the US economy," said Charles Kernot, a mining analyst at Evolution Securities. "There is still a lot of uncertainty in terms of the outlook for the global economy...People are now looking at it being a much slower recovery (than expected)." Traders said rising oil prices, which could feed an inflation spiral, would help bolster gold market sentiment.
Platinum slipped briefly after Johnson Matthey gave a wide range in the price forecast in its annual report, saying prices could move between $950 and $1,350 over the next six months. The report is the centrepiece of the annual gathering of leading figures in the platinum industry for the annual Platinum Week event in London this week.
Platinum later rose more than 2 percent to $1,123 an ounce, compared with $1,100.50 an ounce late in New York on Friday. Platinum group metals languished in 2008 due to problems in the auto sector. Johnson Matthey said demand from the auto sector, a major platinum user, and from the glass and chemical industries was set to decline this year as the economic downturn persists.
Speaking to Reuters on Monday, Anglo Platinum Chief Executive Neville Nicolau said he expects the company to at least break even this year, and stuck to the company's annual production target of 2.4 million ounces. Palladium was bid at $226 from Friday's $222.50, while silver was at $13.77 an ounce from $13.93.
Johnson Matthey said palladium sales from Russian state stockpiles could keep the market in surplus for at least another year. "For both platinum and palladium, the rapid ramp-up in ETF holdings has slowed significantly. As with gold, we believe the slowdown is due to the rally in equity prices since the middle of March," Standard Bank said in a note.
Platinum ETFs reported outflows last week after a period of relative stability. Holdings of ETF Securities' Physical Platinum fund dipped 13.6 percent in the week to Friday, while Zurich Cantonal Bank said its platinum ETF holdings edged down to 170,247.