Gold was little changed on Thursday afternoon, retreating from a record high after another strong earthquake hit Japan. In early trading, gold rose to a record for a third straight session on inflation worries and expectations that the European Central Bank's first rate hike since 2008 would weaken the dollar.
Crude oil and global equities also retreated after a strong earthquake shook Japan, pressuring gold. The dollar strengthened against the euro instead of weakening as many had expected, which put further pressure on gold. Even though the European Central Bank raised rates, investors were not convinced that more rate hikes were on the way.
"You're back to a dollar story for the first time in a long time." said Frank McGhee, head precious metals trader of Integrated Brokerage Services. Spot gold hit a record $1,464.80 an ounce and was later down 0.1 percent to $1,456.14 at 1:14 pm EDT (1714 GMT). US gold futures for June delivery eased 0.1 percent to $1,357.50 an ounce. The ECB raised rates by 25 basis points to 1.25 percent to counter inflation pressure. Gold has risen more than 2 percent this week, benefiting from rallies in crude oil and corn and as Portugal requested a European Union rescue package.
The traditional inverse correlation between gold and the dollar appeared to be strengthening this week to a negative 0.8, as gold hit successive records, but the link could be erratic in the near term. A correlation of minus 1 indicates a perfect inverse link, while a correlation of plus 1 indicates that both are moving in perfect tandem.
Among other precious metals, silver gained 0.2 percent at $39.50 an ounce, just off the previous session's 31-year high at $39.75. Silver has not shaken its image of an unpredictable metal with high volatility and chronic oversupply, but investors seem set on driving prices beyond the recent 31-year high.
On fundamentals, industrial demand for silver is expected to rise less than 10 percent this year, after prices more than doubled to 31-year highs since late 2010, the head of metals research and consultant GFMS said on Thursday. Platinum was down 0.4 percent to $1,781 an ounce, while palladium shed 0.2 percent to $776.50.