Gold prices fell in volatile, currency-driven trade on Tuesday, with the dollar's rally from 15 month lows versus a basket of currencies clipping interest in the precious metal as an alternative asset. Spot gold was bid at $1,100.40 at 1639 GMT, against $1,103.85 late in New York on Monday. The market earlier hit a session high of $1,109.20 an ounce.
The precious metal hit a record high of $1,110.85 an ounce on Monday as the dollar index, which measures the US currency's performance against a basket of six others, slipped to its lowest since August 2008. The metal also found support from renewed investor interest after the International Monetary Fund announced last week it had sold 200 tonnes of gold to India's central bank, which prompted the metal to reach record highs.
"Given all the noises hedge funds have been making, plus all the noise surrounding further potential central bank buying, it is difficult to see much of a downside," said Societe Generale analyst David Wilson. Gold struggled to break new ground as the dollar edged up on Tuesday, with investors fearing the US currency's fall on Monday was overdone. However, expectations the dollar will be unable to sustain gains is helping underpin prices.
US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange were flat at $1,101.40 an ounce. But some physical demand for gold did trickle into the market, with holdings of the world's largest exchange-traded fund, the SPDR Gold Trust in New York, rising just over 6 tonnes on Monday. Among other precious metals, silver was bid at $17.25 an ounce against $17.57.
But the metal is well positioned for gains, according to technical analysts who study past price movements to determine the future direction of trade. The gold/silver ratio rose to 63.2 at the end of last week, against 60.7 at the end of September, suggesting silver has become cheaper relative to gold. Platinum was bid at $1,345 an ounce against $1,357.50, while palladium was at $331.55 against $331. Both metals are primarily used in autocatalysts and have benefited from perceptions the economy is recovering.