LONDON — Gold held near $1,010 (U.S.) an ounce in Europe on Friday as the U.S. dollar's recovery from one-year lows versus the euro took the steam out of its sharp run higher.
Prices are being supported by strong buying on dips, however, as investors continued to bet on a break of the metal's all-time high at $1,030.80 an ounce, set in March last year.
Spot gold to $1,012.10 an ounce at 0930 GMT against $1,011.45 late in New York on Thursday. U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange firmed $1.30 to $1,014.80 an ounce.
Saxo Bank senior manager Ole Hansen said given the momentum gold has built up in its run towards record highs, significantly more dollar strength would be needed to trigger a move lower.
“There has been a lot of buying into this – speculative longs are at a record high, ETF investments are at a record high – so we need to see the break above the highs from last year,” he said. If that were achieved, he said, there was a chance gold could establish a new $1,000-$1,300 range.
“But equally, because there has been so much interest put into this psychological $1,000 level, a break back below would really put a cat among the pigeons,” he added. “We could see the market drop... relatively quickly.”
The dollar recovered from the one-year lows it hit on Thursday versus the euro and a basket of six major currencies as share prices softened.
European shares slipped from the 11-month high they hit on Thursday as investors booked profits from the markets' run higher, after a retreat in Asian stocks overnight.
Declining equities and the firmer dollar pressured oil prices, which fell below $72 a barrel.
Physical demand for gold in India, a key jewellery-buying centre, re-emerged as traders stocked up for the festival season. Demand has been lacklustre this year as high prices put off buyers.
There was little fresh interest in gold-backed exchange traded funds, however, with holdings of the largest, New York's SPDR Gold Trust, unchanged on Thursday at 1,086.5 tonnes.
Among other precious metals, silver, platinum and palladium also edged lower after hitting multi-month highs on Thursday, tracking gains in gold.
The three metals – which, unlike gold, are largely industrial in use – are also benefiting from an improved outlook for the global economy, which is fuelling hopes rising industrial production will cause an uptick in demand.
Palladium, which is used as a component in catalytic converters, broke through $300 an ounce for the first time since September 2008 on Thursday, and is said by analysts to have among the best fundamentals of the all the precious metals.
“Palladium should profit from overall demand recovery forecasts... more than the other precious metals,” Commerzbank analyst Eugen Weinberg told Reuters Television.
“If we consider palladium.... was trading at the beginning of the millennium above $1,000 an ounce, I think there is still plenty of room (for gains) going forward,” he said. “I wouldn't rule out prices going to $400 next year.”
Palladium was unchanged at $301.50, while platinum was at $1,327.50 an ounce against $1,335.50. Silver was at $17.12 an ounce against $17.18.
