Gold prices fell on Friday, staying on track for a weekly loss, as the euro and stock markets extended earlier declines and investors reined in expectations for bullion-friendly new measures to stimulate the US economy. The struggling euro hit a session low against the US dollar and European stocks extended their decline after Spain's Valencia region said it would seek central government help to repay its debts.
Spot gold was down 0.3 percent at $1,577.04 an ounce at 1334 GMT, while US gold futures for August delivery were down $3.60 an ounce at $1,576.80. The gold market has become dominated by short-term investors who buy and sell on relatively small price moves, analysts said, keeping the metal pegged within a $32 range this week, its narrowest weekly spread in more than three months. "Every time we go towards $1,570, some scattered physical related buying emerges," Afshin Nabavi, head of trading at MKS Finance, said. "But there seems to be good selling around $1,590 level too. It's been a very long week within this range. The volatility has dropped as well."
Gold demand in major consumer India remained weak as the rupee ceded more ground to the dollar, boosting local gold prices. Gold imports into India have already seen a more than 50 percent drop this year, and are likely to continue to fall in coming quarters. The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, reported a nine-tonne drop in its holdings on Thursday, its biggest one-day outflow since May 22, bringing its total reserves to a six-month low. "Given the collapse of the rupee, gold prices in India are still close to record highs, which is killing the jewellery market at the moment," Citigroup analyst David Wilson said.
Gold quickly retreated from the week's highs after Federal Reserve chief Ben Bernanke gave no hint of further quantitative easing to boost growth in a speech to Congress on Tuesday. Official sector buying was flagged as another key support to the market. Russia's central bank raised its gold reserves by another 200,000 ounces or 6.2 tonnes in June, data on its website showed on Friday, taking its holdings to a total 29.5 million ounces.
Among other precious metals, silver was down 1 percent at $26.89 an ounce, while spot platinum was down 0.6 percent at $1,404.25 an ounce and spot palladium was down 0.9 percent at $574.25 an ounce. Miner Anglo American, the parent company of number one platinum miner Anglo American Platinum, said refined platinum production totalled 623,000 ounces, down 3 percent on the same quarter last year.
The result came a day after a major reshuffle at its South African units that included a new boss for its platinum unit after the departure of chief executive Neville Nicolau. "Anglo Platinum's problems highlight the growing pressure on South African producers, as sharply higher labour, diesel and electricity costs combine with rising safety-related capex, falling grades and deeper mines to slash operating margins and threaten output," VTB Capital said in a note.