Gold was firmer in Europe on Tuesday as an unexpected fall in US housing starts to record lows in April sharpened risk aversion, supporting the metal's appeal as a safe store of value. Weakness in the dollar is also underpinning prices.
Spot gold stood at $924.80 per ounce by 1513 GMT compared with $917.20 quoted late in New York on Monday. US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $4.40 to $926.10 an ounce. New US housing permits and starts unexpectedly fell to record lows last month, a government report showed, denting expectations stability in the housing market was imminent.
Gold touched a high of $927.40 in the wake of the data. "Gold still seems to be caught amidst heightened risk aversion and rising optimism in the global equity markets," said Richcomm Global Services senior analyst Pradeep Unni. A better appetite for stocks is diverting some investment for bullion, analysts said. US stocks turned positive on Tuesday after earlier losses.
Some investors have plugged into gold to hedge equally against potential for the positive mood to sour and inflationary problems posed by quantitative easing. "Broadly what we've seen is an increase in non-commercial long positions from tactical investors and broader currency related movements," said Barclays Capital analyst Suki Cooper.
She cited CFTC data for the week ending May 12, showing non-commercial positions in US Comex gold futures rising primarily on the back of fresh long positions being established. On Friday bullion hit a seven-week high of $933.65 per ounce after data showed US core inflation in April rose more than expected.
But short-term, the market could see some seepage after several failed attempts to capture and hold the $925 mark. "Gold was overbought and failed in the low $930s again yesterday, so needs a correction," said Simon Weeks, director of gold sales at ScotiaMocatta in London.
Platinum rose to $1,137 from $1,128.50, boosted by news US President Barack Obama would propose the most aggressive increase in US auto fuel efficiency ever, which could lift usage of the metal to clean auto emissions. The policy initiative would directly regulate emissions for the first time and resolve a dispute with California over cleaner cars.
On the investment front, ETF Securities' platinum-backed exchange-traded commodity saw inflows of 3,246 ounces on Monday, recovering slightly after hefty outflows of nearly 43,000 ounces last week. London is playing host to the annual Platinum Week gathering. Spot silver was quoted at $14.01 an ounce from $13.72 late on Monday, while palladium was at $231 compared with $226.50.