Gold (GC-FT951.10-2.40-0.25%) rose in Europe on Tuesday, as the U.S. dollar depreciated and fresh gains in equity markets boosted appetite for riskier assets, while platinum (PL-FT1,215.50-7.00-0.57%) and palladium (PA-FT264.050.100.04%) held near multi-week highs.
Spot gold was bid at $953.75 (U.S.) an ounce at 1126 GMT, against $952.65 an ounce late in New York on Monday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange rose 50 cents to $954.00 an ounce.
Spot prices remained within a $945-960 range for a sixth straight session, as investors stuck to the sidelines during the seasonally weak summer period.
According to analyst Walter de Wet at Standard Bank, the longer gold remains confined to its current range, the greater the possibility of it eventually breaking lower.
“At these levels the bias is the downside for gold,” he said. “It is going to be tough for gold to move higher.”
“If the dollar continues to soften it is going to support the gold price, but even then, if we close in on $1,000 an ounce... we will see a reaction from the physical side and more scrap coming onto the market,” he said.
The dollar slid to an eight-week low against the euro and its weakest this year versus a basket of currencies. Gold, like other dollar-priced commodities, becomes cheaper for holders of other currencies as the U.S. unit weakens.
European shares rose after posting their highest close since November on Monday on expectations of more strong second quarter earnings, helping lift oil above $68 a barrel.
Rising crude prices can support gold, which is often seen as a hedge against oil-led inflation.
In supply news, the South African mineworkers' union told Reuters it had accepted the latest wage offers from gold and coal companies, averting a strike in the mining sector. South Africa is the world's third biggest gold producer.
The smaller platinum group metals (PGMs), palladium and rhodium, performed strongly on Tuesday after their sister metal platinum hit a six-week high on Monday as the weaker dollar and strength in gold prices underpinned gains.
Palladium climbed to a seven-week high of $263 an ounce on Tuesday, tracking platinum higher, while rhodium rose another $75 to $1,675 an ounce.
“Palladium has been the underperformer of the major PGMs over last 12 months. But there has been buying alongside the rises we have seen in platinum and gold over the last two to three weeks,” Rory McVeigh, a PGM trader at Commerzbank, said.
All three metals, which are primarily used in the auto industry as components in catalytic converters, have suffered from a fall in car demand over the last year.
But Mr. McVeigh said there were tentative signs of recovery.
“Carmakers are beginning to see light at the end of the tunnel and begin to look at 2010/11 when they will be needing this metal again,” he said.
“The shift away from diesel engines to small cars for efficiency has also played into palladium's pricing.”
Platinum was at $1,211 an ounce against $1,215, while palladium was at $260.50 against $259. Elsewhere silver was at $13.98 an ounce versus $14.01, having earlier matched the previous session's four-week high of $14.08.
