Gold edged up on Friday on solid physical purchases by Asian investors after slipping near $790 an ounce, but the metal stayed under pressure on the dollar's strength and weaker oil prices.
Investors were also shaken by sharp falls in equities, prompting them to shift to dollars while pulling funds out of risky assets, including precious metals, but Asian bargain hunters were detected buying gold on dips.
“Gold started lower in Asia, falling near $790, but around the level we are seeing a big amount of physical gold buying from Asian players,” said Yuichi Ikemizu, managing director at Standard Bank in Tokyo.
COMEX gold futures were also off lows after settling down $5 in New York the previous day. The most active December contract was trading at $802.5, down $0.7 or 0.1% from the New York settlement.
The benchmark August 2009 gold contract on the Tokyo Commodity Exchange was trading at ¥2,750 per gram, down ¥108 or 3.8% from Thursday.
Cash gold fell as low as $789.05 on Wednesday, its weakest in two weeks and near its nine-month low around $773 hit in mid-August.
Buyers in India, the world's largest consumer, bought in large volumes on price dips ahead of the peak festive season in October.
Investment bank UBS, one of the largest gold dealers, said that over the last two weeks, it had seen its strongest physical sales in 20 years.
But market participants were keen to see if further bargain hunting would emerge in the physical market.
Gold prices have been put under pressure, slipping about 5% over the past week, reflecting the strength of the dollar and plunges in oil prices.
The dollar rose against the euro after US service sector data came in stronger than forecast, then extended its gains after European Central Bank President Jean-Claude Trichet said the euro zone was in a period of weak economic activity.
Oil prices fell below $108 on Friday after dropping nearly 8% this week.
“Investors are extremely careful about taking new risk positions, including oil and commodities, while funds are shifting into the dollar,” said Tatsuo Kageyama, a market analyst at Kanetsu Asset Management.
“It could take a while before the market can fully restore their confidence to shift back their positions into commodities,” Kageyama said.
Platinum dropped as lingering concerns over demand for autocatalysts due to news of poor car sales in the United States prompted investment funds to sell.
Platinum faced speculative sales amid talk that carmakers were selling their holdings back to the market due to poor sales.
US auto sales results announced earlier in the week showed they fell 15.5% to 1.25 million units or to a seasonally adjusted, annualized rate of 13.72 million units in August.
This marks the 10th straight month of declining sales in the US auto market - the longest such downturn since the 2001 recession.
The benchmark TOCOM platinum contract for August 2009 was trading at ¥4,670 a gram, down ¥242 or 4.9% from Thursday.
At one point during the day, the platinum contract fell by the daily ¥300 limit, or 6.1%, to ¥4,612.
Spot platinum was at $1,373.50/1,393.50 an ounce, down from $1,391.50/1,411.50 in New York. Palladium was little changed at $281.50/289.50 an ounce from late New York.
Silver rose to $12.77/12.82 an ounce from $12.74/12.80 late in New York. (Reuters)