Gold firmed in Europe on Friday as price-sensitive investors took advantage of the previous day's losses to buy into the market, with underlying concerns over European sovereign debt levels still underpinning prices.
Spot gold was bid at $1,219.95 (U.S.) an ounce at 0936 GMT, against $1,215.80 late in New York on Thursday. U.S. gold futures for August delivery eased 20 cents to $1,222.00.
Gold slipped 1 per cent on Thursday as a rise in stocks and the euro reflected sharper appetite for nominally higher-risk assets. The metal is still struggling to make further headway after hitting a record $1,251.20 an ounce earlier this week.
"For the moment, concerns that the recovery would be derailed by the sovereign debt crisis and China slowing seem to have lessened - not gone away, but lessened," said Credit Agricole analyst Robin Bhar. "In that sort of environment, gold will struggle."
"It probably needs to consolidate around the $1,200-1,220 range and secure a foothold there," he added. "Demand for gold as a safe haven and an alternative currency remains, though maybe not in the heightened way is was a few weeks ago."
The euro's rally ran out of steam on Friday, with the single currency running into headwinds above $1.21. Profit taking set in when it failed to push through hefty resistance, analysts said.
European shares firmed at the open for a third session amid optimism over global growth despite Europe's debt woes, while Asian stocks also climbed overnight.
Sharp falls in equity values and the euro this year have benefited gold as an alternative asset, seen as a safe store of value at time of volatility in other markets.
"The rallies in the euro and global equity markets are signs that risk may be receding, at least in the short term, and this could weigh on gold and silver prices," said HSBC analyst James Steel in a note.
Among other commodities, base metals firmed, though oil prices fell more than 1 per cent.
ETF INVESTMENT STRONG
The VIX volatility index, known colloquially as Wall Street's fear gauge, dipped back under 30 on Friday. It rose as high as 37.38 earlier this week, a move which corresponded with gold's climb to record highs.
Investment demand continued to be strong, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust , rising 7.6 tonnes to a record 1,306.137 tonnes on Thursday.
However, Indian gold buying remained weak for a fourth day as traders sought lower prices, though a stronger rupee helped make the dollar-quoted asset cheaper for local buyers, dealers said. India is the world's biggest gold consumer.
From a technical perspective, gold's consolidation is likely to set it up for fresh gains in the medium term, analysts said.
"Despite the recent weakness, we continue to see pullbacks as counter trend and temporary ahead of a resumption of the larger bulltrend," said Barclays Capital in a note.
Among other precious metals, silver was at $18.30 an ounce versus $18.19, platinum at $1,541.50 an ounce versus $1,534, and palladium at $449.53 against $450.50.
"Other precious metals have once again started to outperform gold amid improving sentiment, with the gold to silver ratio tumbling below 68 having made highs near 70 earlier this week," said VTB Capital analyst Andrey Kryuchenkov in a note.
"Also, the platinum to gold ratio nudged to 1.25, from 1.22 at the start of the week."Report Typo/Error
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- Gold Front Month Futures$1,319.80+0.40(+0.03%)
- SPDR Gold Trust$126.23+0.01(+0.01%)
- Silver Front Month Futures$19.050.00(-0.02%)
- NYMEX PLATINUM FUTURES CHAIN Front M$1,027.90+5.60(+0.55%)
- NYMEX PALLADIUM FUTURES CHAIN Front$713.400.00(0.00%)
- Updated September 28 12:53 PM EDT. Delayed by at least 15 minutes.