Gold futures ended lower after trading in a tight range Thursday as bullion investors took profits while looking for signs of economic strength to fuel the metal's recent rally amid inflation concerns.
On Wednesday, gold rose to a two-week high above $940 (U.S.) an ounce on a tumbling dollar and inflationary U.S. economic data that sent Wall Street nearly 3 per cent higher. U.S. stocks ended 1 per cent higher Thursday.
Bullion has recently been underpinned by overall economic optimism. The metal, which is viewed as an inflation hedge, has recently been weighed down by the prospect of deflation, or a downward spiral in prices.
U.S. August futures settled down $4 at $935.40 an ounce on the Comex division of the New York Mercantile Exchange. Spot gold was at $937 an ounce at 3:28 p.m. ET, against $938.45 an ounce late in New York on Wednesday.
A poll of precious metals analysts and traders conducted by Reuters showed sentiment towards the assets has improved since the last survey in January.
The average 2009 gold forecast taken from the poll rose 7.8 per cent to $930 an ounce, while the expected silver price rose by 18 per cent.
"The major factor for the precious metals markets will be the recovery of the global economy and inflation fears," said Peter Fertig, a consultant at Quantitative Commodity Research.
Gold slipped on Thursday with lacklustre demand for jewellery and bullion to back exchange-traded funds, traders said.
Indian gold prices were supported by the weak rupee, but buyers stayed away during a seasonally weak period for sales.
Holdings of the largest gold ETF, the SPDR Gold Trust, were unchanged.
"I am surprised gold is at this high level, given the lack of demand," said Commerzbank analyst Carsten Fritsch. "We have seen outflows from the SPDR of 15 tonnes on Tuesday alone, and there is still lacklustre jewellery demand."
"The only factor supporting gold is dollar weakness," he said.
Investors are awaiting a further raft of earnings due in the United States on Friday, with Citigroup, General Electric and Bank of America all due to release figures.
Among other precious metals, platinum was at $1,160.50 an ounce against $1,156, while palladium was at $246 against $244.50 and silver was at $13.27 an ounce against its previous session's finish of $13.25.
The Reuters poll showed platinum price forecasts were on average 17 per cent higher than in January, at $1,130 an ounce in the full year, while the average palladium forecast was up nearly 10 per cent at $230.
While both metals are expected to benefit from the improving outlook for car sales, industrial demand for the metals used in auto catalysts is not expected to recover until 2010.