Gold prices erased losses after a larger-than-expected dip in US retail sales on Wednesday, but market talk was still dominated by theories on how the United States can avoid a crushing fiscal crisis, while platinum rose on supply concerns. Spot gold rose 0.27 percent to $1,729.51 an ounce by 1413 GMT, well below last Friday's three-week high around $1,738. US gold futures for December firmed 0.32 percent to $1,730.40.
Bullion hit a record $1,920.30 in September 2011, when investors turned to the metal as a safe haven as Europe's debt crisis gathered steam. David Wilson, analyst with Citigroup, said gold prices had firmed with the falling dollar after US retail sales fell in October for the first time in three months, but he said it was unclear if this would have any prolonged impact on the economy.
Broker Marex Spectron said gold remained in a $1,715-1,735 range for the time being, but it still saw upside price risk unless dramatic developments unfold in other financial markets. Sentiment centred on the so-called "fiscal cliff", with investors debating on how long Washington will take to find compromises and avoid a series of mandated tax hikes and spending cuts that could send the world's largest economy back into recession.
"If we have brinkmanship, and we don't see a resolution, that could put downward pressure on gold," said Daniel Brebner, analyst with Deutsche Bank. Participants in an annual gathering of the London Bullion Metal Association on Tuesday said they expected gold to reach $1,843 an ounce by the time of the next conference in September 2013, and forecast silver to reach $38.40.
Silver was up 0.49 percent at $32.62 an ounce. Platinum climbed to $1,597.50, its strongest since October 23, driven chiefly by supply concerns highlighted by refiner Johnson Matthey, and was last at $1,584.25. Sister metal palladium marked its strongest since October 18 at $647.22, and was last at $643.00.
Supply outages in South Africa are set to push the platinum market into deficit this year as shipments from the world's main producer of the metal fall by the equivalent of more than a month's demand, Johnson Matthey said on Tuesday. "There is concern for platinum producers in South Africa - their financial strength and the continued tension between labour groups," Brebner said.