LONDON: Gold eased in Europe on Tuesday as the dollar rebounded on the back of uncertainty over the extent of quantitative easing (QE) expected from U.S. authorities, denting interest in the metal as a haven from weak currencies.
Spot gold was bid at $1,344.30 an ounce at 1121 GMT, against $1,352.95 late in New York on Monday. U.S. gold futures for December delivery fell $9.20 an ounce to $1,345.20.
Prices rallied to a record $1,364.60 an ounce last week as expectations the Federal Reserve would move towards further quantitative easing to bolster the flagging U.S. economy undermined the dollar.
Standard Bank analyst Walter de Wet said there had been a response to higher prices as holders of scrap jewellery were being tempted to sell gold back onto the market.
“There is some dollar strength, (with) strong support for the dollar at $1.40 against the euro,” he said. “But we also continue to see scrap coming to the market.”
“Despite strong investment demand, the physical market is providing resistance to the latest move higher.”
The dollar rose to a one-week high versus the euro on Tuesday, extending gains that began in the previous session as investors worried the U.S. currency had fallen too far, too quickly.
Analysts said the currency market had already priced in aggressive U.S. monetary easing and that if the Fed does not press ahead with such a policy at its Nov. 21 meeting, the dollar is likely to rebound.
“Today’s focus will be on the release of the latest Federal Open Market Committee minutes for any further insight into the central bank’s thinking on further stimulus measures,” said CMC Markets analyst Michael Hewson in a note.
“But given that the U.S. dollar has declined 10 percent against the euro since the September lows, one has to wonder how much quantitative easing may already be priced in.”
SPDR ETF HOLDINGS DECLINE
Investment interest in gold-backed exchange-traded funds was soft, meanwhile, with holdings of the world’s largest, New York’s SPDR Gold Trust, declining by just under 1 ton on Monday to 1,287.327 tons.
The trust’s holdings have dropped nearly 7.5 tonnes so far this month, despite a 2.6 percent rise in gold prices.
“It is remarkable that these outflows have not put that much pressure on gold prices so far,” said Commerzbank in a note. “Physical buying interest in Asia ahead of the major religious festivals is apparently forming a counterweight.”
Among other precious metals, silver was bid at $23.03 an ounce against $23.29, while platinum was at $1,674.50 an ounce against $1,683.15.
Palladium was showing the biggest correction of the major precious metals on Tuesday, down 1.7 percent at $575.50 an ounce against $585.45 late on Monday.
However, it has still strongly outperformed platinum so far this year as analysts predicted firmer fundamental support for the autocatalyst metal later this year from a recovery the gasoline-consuming U.S. and Chinese car markets.
Gasoline engines bear a heavier loading of palladium than platinum in their catalytic converters. Platinum is more exposed to the more slowly recovering European market, where diesel engines are more commonly used.
