Gold buying picks up in India for Dhanteras festival
Gold (GC-FT1,056.40-8.30-0.78%) prices edged lower in Europe on Thursday on concerns a rally which took the precious metal to record highs of $1,070.40 (U.S.) an ounce in the last session had been overdone.
A fall in the dollar index to 14-month lows pushed gold sharply higher on Wednesday, but it failed definitively to breach resistance at $1,069 an ounce. A further slide of the U.S. currency has failed to spark fresh buying.
Spot gold to $1,055.85 an ounce at 0920 GMT against $1,061.90 late in New York on Wednesday.
“If we come back through $1,055, we could have more of a serious correction, but we are really in the hands of outside influences at the moment,” said Simon Weeks, head of precious metals at the Bank of Nova Scotia.
“Sentiment is still very negative towards the dollar.”
While weakness in the U.S. unit is likely to support gold for the moment, in the longer term a question mark remains over how far the dollar can fall. “At the end of the day, the dollar still remains the world's clearing currency,” said Mr. Weeks.
“People still hold a lot of dollars round the world, and it is not in anyone's interests to have a major meltdown.”
U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange fell $8.00 to $1,056.80 an ounce.
The U.S. dollar fell to 14-month lows against the euro on Wednesday as comments from U.S. policymakers reinforced expectations U.S. interest rates will stay lower for longer than those of other major economies.
A weak dollar tends to support gold, as it boosts the metal's appeal as an alternative asset and makes it cheaper for holders of other currencies.
Strong oil prices, which also supported buying of gold and commodities as an asset class, extended gains to a year-high of $75.72 a barrel on Thursday, after U.S. industry data showed a decline in crude stockpiles.
On the wider markets, European shares extended gains to hit a one-year high for a second session, with strong earnings reports from the likes of JPMorgan and a consequent rise in U.S. stocks supporting buying.
Rising appetite for risk is weighing on the dollar, as investors turn to higher-yielding currencies at the expense of the U.S. unit. However, a correction in stock markets could reverse the trend, analysts say.
Physical demand for gold picked up in India for the Dhanteras festival, typically an auspicious time for gold buying, as prices softened. India was the world's biggest gold consumer last year.
But while demand is higher than in recent weeks, it is well down on a year ago, dealers said. “People who used to buy 10 grams, are buying five grams,” said Shekar Jog, a partner with Sangli-based V.S. Bullion. “But they are still buying.”
Among other precious metals, silver (SI-FT17.59-0.32-1.80%) was at $17.73 an ounce against $17.85, tracking the correction in gold, while palladium (PA-FT327.50-3.30-1.00%) was at $323 against $326.50.
Platinum (PL-FT1,353.50-13.10-0.96%) was at $1,345.50 an ounce against $1,358, having hit a 13-month high of $1,362.50 an ounce on Wednesday.
“Platinum is holding onto its gains to new highs,” said technical analysts at Barclays Capital in a note. “Such price action is encouraging for further gains into the $1,400 area.”
