July 28, 2009 / 3:39 AM / 10 years ago

Gold edges lower as dollar recovers losses

LONDON (Reuters) - Gold slipped in Europe on Tuesday as the dollar recovered losses against the euro, with a downturn in equity markets in Europe and stock futures in the United States knocking appetite for riskier assets.

Platinum and palladium held near multi-week highs, however, as cautious optimism over the demand outlook boosted interest in the autocatalyst materials.

Spot gold was bid at $949.20 an ounce at 1242 GMT (8:42 a.m. EST), 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 fell $4.10 to $949.30 an ounce.

The dollar recovered after hitting an eight-week low against the euro and its weakest this year versus a currency basket as a slide in the equity markets after weak company results dented risk appetite.

“Gold has been tracking the U.S. dollar,” said Citigroup analyst David Thurtell. “I suspect that quite a large stop was triggered just below the $952 mark.”

Gold, like other dollar-priced commodities, becomes cheaper for holders of other currencies as the U.S. unit weakens. Crude prices also snapped a nine-day winning run to slip down, denting interest in gold as a hedge against oil-led inflation.

Gold prices remain within a $945-960 range for a sixth straight session, however, as investors stick 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.”

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.

PALLADIUM HIGH

The smaller platinum group metals (PGMs), palladium and rhodium, performed strongly on Tuesday after platinum hit a six-week high on Monday.

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, primarily used in the auto industry as components in catalytic converters, have suffered from a fall in car demand over the last year.

But 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.

Platinum was at $1,212.50 an ounce against $1,215, while palladium was at $261 against $259. Silver was at $13.96 an ounce versus $14.01, having earlier matched the previous session’s four-week high of $14.08.

Reporting by Jan Harvey and Martina Fuchs; Editing by William Hardy

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