Gold prices fell more than 1 percent on Wednesday as pressure from a stronger dollar and a weaker tone to stocks markets and other commodities combined with profit-taking ahead of quarter-end to push the metal through key support. Pressure from other markets has meant gold has struggled to maintain gains after hitting 6-1/2 month highs this month after the Federal Reserve, the European Central Bank and the Bank of Japan all took steps to further loosen monetary policy.
The easing measures, which are expected to keep long-term interest rates low while stoking inflation fears and boosting liquidity, lifted gold out of its previous lacklustre range. "(The drop) has been brewing all week following the return of dollar strength," Saxo Bank vice president Ole Hansen said. "With activity fairly light, someone went looking for stops and found them below $1,755. With that support now removed, the true strength of the current rally is about to be tested."
Spot gold was down 0.8 percent at $1,745.00 an ounce at 1404 GMT, while US gold futures for December delivery were down $18.20 at $1,748.20. Earlier it rose as high as $1,765.40, before reversing those gains to hit $1,739.70. Investment in gold has been firm, with holdings of gold-backed exchange-traded funds rising by nearly 300,000 ounces on Tuesday, according to Reuters data, to a record 74.063 million ounces, with most fresh flows moving into New York's SPDR Gold Trust.
But appetite for bullion from number one buyer India remained fragile. Gold importers there stayed away from fresh deals for a second day as prices recovered from their lowest in more than two weeks due to a weaker rupee. "Sales are nowhere equal to what they were last year," Harshad Ajmera, proprietor of JJ Gold House, said. Silver was down 0.5 percent at $33.53 an ounce. Spot platinum was down 0.3 percent at $1,615.24 an ounce, while palladium was down 2.1 percent at $618.22 an ounce.
Platinum prices have retreated from the 6-1/2 month highs they hit earlier this month after violence linked to labour unrest at a mine operated by number three producer Lonmin in South Africa led to 45 deaths. Faced with a dearth of demand from consumers in the European auto sector - platinum is a key component in catalytic converters, chiefly in diesel engines - prices have struggled to maintain gains even in the face of ongoing unrest in South Africa. An illegal strike spread through AngloGold Ashanti's operations there on Wednesday, while Anglo American Platinum said it could start firing unlawful strikers on Thursday.
"Interest in platinum is still elevated and the price floor is now at least $150 above this year's lows, but investors are cautious about pushing the market higher from here," UBS said in a note on Wednesday. "A slew of further negative headlines, including an escalation at Impala and/or Anglo Platinum would attract further spec buying. But with spec positioning already stretched, and with prices no longer at the extreme or attractive end as $1,400 was regarded, buyers may not be in the same rush as before."