Gold prices fell Thursday as the U.S. dollar rose broadly ahead of a key U.S. employment report and as bullion investors took profits after recent gains.
Platinum and palladium hit multi-month highs, meanwhile, after confirmation that the first U.S. platinum- and palladium-backed exchange-traded funds (ETFs) will be launched Friday. Platinum group metals prices later traded flat as investors had long anticipated the news.
Spot gold was at $1,133.50 (U.S.) an ounce at 2:58 p.m. ET, against $1,137.90 late Wednesday. Prices climbed 4 per cent in the first three trading sessions of 2010 to a three-week high of $1,140.20, but struggled for traction as the dollar recovered.
"There is still a lot of enthusiasm for commodities as an asset class, and for precious metals and gold particularly," said Tom Kendall, precious metals strategist at Mitsubishi Corp.
"But it has got to work against some of the dollar strength we have seen recently. That is going to act as a brake on the market," he added.
U.S. February gold futures on the Comex division of the New York Mercantile Exchange ended $2.80 lower at $1,133.70 an ounce.
In the short term, the dollar remains the main price driver. The U.S. currency rose broadly a day before the release of a closely watched U.S. government jobs report, expected to show two years of job losses in the U.S. economy ended last month.
"With the employment report coming in tomorrow, there is a lot of caution in all the markets," said Bill O'Neill, partner at Logic dvisors. "Gold has had a nice run since the beginning of the year and is due for some consolidation."
Commodity prices were also pressured by news of tighter monetary policy in China, a major consumer of industrial raw materials.
China's central bank surprised markets by raising the interest rate on its three-month bills for the first time since August, intensifying its grip on liquidity a day after it promised to keep credit growth in check.
Further selling was seen from the world's largest gold exchange-traded fund, the SPDR Gold Trust, Wednesday, with its holdings down 4.876 tonnes. They have declined nearly 10 tonnes in the first three trading days of 2010.
Among other precious metals, silver was at $18.27 an ounce against $18.18, while platinum was at $1,552 an ounce against $1,555 and palladium at $421.50 against $426.
Earlier in the session, platinum matched the 16-month high it hit Wednesday at $1,561 and palladium reached its firmest since July, 2008, at $431.50 on news of the new exchange-traded products.
NYSE Euronext said the funds, operated by a U.S. subsidiary of London's ETF Securities, will trade on the NYSE Arca platform.
"Everybody tends to rush into gold when they think of precious metals, but platinum has the added benefit of a high level of industrial input," Mr. O'Neill said.
"With the growth of car usage in India and China, demand for platinum group metals should be quite buoyant. It is going to attract a lot more attention in the future," he added.
Traders say the ETPs, which will issue securities backed by physical stocks of the precious metals, could see significant inflows of platinum and palladium on their launch.