Gold weakens as market cautious before weekend

NEW YORK/LONDON (Reuters) - Gold drifted lower on Friday in a cautious trading tone in spite of a decline in the dollar, and analysts said the market was likely to continue moving in a range in the near term.

Gold bars are displayed at the headquarters of Mitsubishi Materials Corporation in Tokyo January 9, 2008. REUTERS/Toru Hanai

The catalyst could come from sharp changes in the currency and the energy markets or heavy buying from investment funds, betting on strong returns in the long term, they said.

Gold was at $924.60/925.40 an ounce by New York’s last quote at 2:15 p.m. EDT, against $925.90/926.70 in New York late on Thursday and a record high of $1,030.80 on March 17.

Zachary Oxman, senior trader with Wisdom Financial in Newport Beach, California said that investors have been averse to taking additional risk under the current market conditions.

“There is a general tone of lower willingness to take risk at this point. I think you are probably seeing people being hesitant or not allowed to take as much risk as they normally would,” Oxman said.

The yen rose broadly against the dollar after a fall in earnings of U.S. bellwether General Electric stoked fears about the economy, causing investors to dump risky trades.

A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

U.S. crude ended up 3 cents at $110.14 a barrel, reversing initial losses, lifting gold from session lows.

But some analysts said the market might gather upward momentum next week.

“The $930-mark has proved a hard nut to convincingly crack in the past few days, but I think gold is in for a fresh push higher,” said David Thurtell, metals analyst at BNP Paribas.

“U.S. consumer sentiment data was extremely weak, and the possibility is that the euro can touch $1.60 next week, dragging gold higher,” he added.


Gold struck a record high above $1,000 an ounce last month but has since struggled to sustain the uptrend, with a broad commodities pullback dragging the price down.

In the U.S. futures market, the active contract for June delivery settled down $4.80 at $927 an ounce.

Spot platinum fell to $2,002/2,007 an ounce from $2,024/2,032 late in New York on Thursday.

“The nature and extent of the South African power shortages that brought (platinum) production to a halt for five days in January are unlikely to be resolved in the near term given the operational and capacity constraints,” Barclays Capital said.

Silver was down at $17.74/17.79 versus $17.95/18.00, its previous finish in the U.S. market, but palladium rose $7.50 to $466/474.

Editing by Marguerita Choy