Gold recovered from two-week lows on Friday as the dollar slipped against the euro after data showed consumer sentiment in the United States was improving. Spot gold fell as low as $984.70 an ounce, its lowest since September 10. It was bid at $991.40 an ounce at 1453 GMT from $993.75 late in New York on Thursday.
Gold recovered its poise as the dollar fell after the Reuters/University of Michigan index of consumer sentiment rose to 73.5 in September from 65.7 in August. Traders said gold's relationship with the dollar over the past few weeks has become stronger. A lower dollar makes commodities cheaper for holders of other currencies.
"The currency market seems to have taken encouragement from the consumer sentiment data... (which) suggests that Mr and Mrs America are getting ready to return to the malls after an extended leave of absence," said Citigroup analyst David Thurtell. Investors disappointed with gold's failure to break higher have been selling gold over the last few days, traders said.
Bullion rallied to an eighteen month-high of $1,023.85 an ounce last week, within a reach of its record high of $1,030.80 an ounce struck in March 2008. "The market's been looking heavy for a while now ... The dollar is generally a bit firmer," said Simon Weeks, director of precious metals at Bank of Nova Scotia.
"Expectations for ongoing dollar weakness are likely to generate further investor buying in gold on a world-wide basis," said John Meyer, analyst at Fairfax investment bank. Some analysts also said gold could draw support from resilient demand in the physical market in Asia, specifically in India, the world's largest consumer of gold.
But the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings fell to 1,094.107 tonnes as of September 24 from 1,101.735 tonnes the previous business day. Silver was at $16.14 an ounce from $16.18, platinum at $1,282 from $1,297.5 and palladium was at $290 from $291.5 on Thursday. "For most of the precious metals investor inflows have been very strong," said Dan Smith, analyst at Standard Charted. "It suggests to us gold is going to remain resilient. Our advice is you should be long in gold and platinum, and short in some of the base metals."