Gold prices slipped below $1,040 per ounce in Europe on Friday as the dollar extended gains against a basket of currencies, helped by a retreat in risk appetite as US stocks slid after mixed economic data. Spot gold was bid at $1,037.60 an ounce at 1602 GMT, against $1,044.95 late in New York on Thursday. US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange fell $9.10 to $1,038.00 an ounce.
"(Gold) is just tracking the US dollar, as usual," said Citigroup analyst David Thurtell. He said he did not necessarily believe the dollar's recovery was sustainable, however. "Sovereign wealth funds are still sellers and central banks still have the pedal to the metal," he said.
"The chart looks favourable after yesterday's move to within $1.10 an ounce of key support from the September 17 high at $1,025.80," said MF Global in a note. The light physical demand for gold that emerged in major consumer India after the metal retreated from record highs earlier this week is abating, dealers said, as prices resumed their rise. Traders in India said more buying would be seen if the metal retreated to $1,020 an ounce, or 15,800 rupees per ten grams.
Elsewhere holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, were unchanged on Thursday after three sessions of declines. On the supply side, Harmony Gold Mining, the world's fifth largest gold producer, said that due to the strength of the rand, it may have to consider restructuring some of its lowest-grade, highest-cost operations.
Elsewhere, the London Metal Exchange said it is working with clearing house LCH.Clearnet to offer a clearing system for the over-the-counter bullion market. Among other precious metals, spot silver was bid at $16.20, against $16.63 an ounce late on Thursday. The world's largest silver ETF, the iShares Silver Trust in New York, said it saw an inflow of 131.43 tonnes on Thursday.
As well as strong investment buying, traders say they are also seeing a pick-up in industrial demand for silver. The metal is primarily industrial in application, and is widely used in electronics manufacturing. Platinum was at $1,314.50 an ounce against $1,337.50, while palladium was at $319.50 against $325.50.