LONDON - Gold retreated on Thursday from the record high it hit last session as the firmer dollar weighed, with the U.S. unit holding gains versus the euro after the European Central Bank left interest rates unchanged. The precious metal reached a record $1,097.25 an ounce on Wednesday after a pledge from the U.S. Federal Reserve to keep interest rates low knocked the dollar. But the currency bounced back, diminishing interest in gold as an alternative asset.
Spot gold was bid at $1,089.75 an ounce at 1313 GMT, against $1,092.35 late in New York on Wednesday. U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $3.20 to $1,090.50 an ounce.
“The fact that we didn’t manage to go through $1,100 might lead some investors to reconsider their positioning in the sector,” said Commerzbank analyst Eugen Weinberg.
“Should the dollar become stronger over the coming days I would expect to see more profit taking,” he added. “I think... we will see a prolonged correction, because the trend of the last few weeks is becoming a bit too pronounced.”
The dollar index, which measures the U.S. currency’s performance against a basket of six others, was higher on Thursday, holding onto gains after the ECB’s rates decision.
Traders will be closely watching a news conference with ECB president Jean-Claude Trichet due to begin at 1330 GMT for clues as to the next direction of currency trade.
Cenbanks eyed
Speculation continued over the prospect of further central bank gold acquisitions, after India’s purchase of 200 tonnes of bullion from the International Monetary Fund on Monday. The report helped push gold to record highs.
Sri Lanka’s central bank said it had been buying gold for the last five or six months as it diversifies its reserves amid volatile markets.
A former adviser to the People’s Bank of China poured cold water on the idea that the PBC will buy IMF gold, saying locally-sourced bullion would be cheaper.
In the physical market, gold traders in India, the world’s biggest bullion consumer last year, reported poor demand as high prices put off buyers.
“Demand continues to be slack even though we were running at a discount of 150 (rupees per 10 grams),” said Pinakin Vyas, chief manager-treasury at IndusInd Bank in Mumbai. “I have advance orders at about $1,050 (an ounce).
Among other precious metals, spot silver was bid at $17.39 an ounce against $17.44. Holdings of the world’s biggest silver-backed exchange-traded fund, the iShares Silver Trust, fell 3.85 tonnes on Wednesday.
Platinum was at $1,356 an ounce against $1,364, while palladium was flat at $327. The metals, both primarily used in autocatalysts, are both sensitive to car demand.
Toyota Motor Corp, the world’s biggest carmaker by sales, halved its annual loss forecast but failed to convince investors it is back on track, as government subsidies peter out and a strong yen takes its toll.
