Gold fell on Tuesday as the US dollar rebounded and uncertainty prevailed over what the Federal Reserve will do to support growth, while Goldman Sachs said falling US rates prompted it to lift its gold price forecast. Spot gold was bid at $1,346.95 an ounce at 1520 GMT, against $1,352.95 late in New York on Monday. US gold futures for December delivery fell $6.40 an ounce to $1,348.00.
Prices rallied to a record $1,364.60 an ounce last week as expectations the Federal Reserve would move towards further quantitative easing to bolster the flagging US economy undermined the dollar. Many analysts expect to see some pullback in the gold price before the uptrend resumes. Investment bank Goldman Sachs said a period of slowing US growth coupled with a fresh round of quantitative easing had prompted it to raise its 12-month gold forecast to $1,650 an ounce, from around $1,365 previously.
"Underpinning (gold) is a belief in this market that nothing is being fixed in the global economy. It's not all over, it's not all fabulous and great, there are real fears of recession, of dollar weakness," said Peter Hillyard, director of commodity sales at ANZ.
"In other words, we get respite from these things and a sense of calm ... and gold is reacting to that," he said. The dollar rose to a one-week high against the euro on Tuesday, extending the previous session's gains as investors worried the US currency had fallen too abruptly. Investment interest in gold-backed exchange-traded funds was soft, meanwhile, with holdings of the world's largest, New York's SPDR Gold Trust, declining by just under 1 tonne on Monday to 1,287.327 tonnes.
The trust's holdings have dropped nearly 7.5 tonnes so far this month, despite a 2.6 percent rise in gold prices. "It is remarkable that these outflows have not put that much pressure on gold prices so far," said Commerzbank in a note. "Physical buying interest in Asia ahead of the major religious festivals is apparently forming a counterweight." Silver was bid at $23.16 an ounce against $23.29, while platinum was at $1,689.00 an ounce against $1,683.15.
Palladium was virtually flat on the day at $585.00 against $585.45 late on Monday. However, it has still strongly outperformed platinum so far this year as analysts predicted firmer fundamental support for the autocatalyst metal later this year from a recovery in the gasoline-consuming US and Chinese car markets.
Gasoline engines bear a heavier loading of palladium than platinum in their catalytic converters. Platinum is more exposed to the more slowly recovering European market, where diesel engines are more commonly used. The platinum-palladium ratio - the number of ounces of palladium needed to buy an ounce of platinum - fell to its lowest since early 2004 this week at just under 2.9.