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Gold softens but stays near record, platinum drops

Gold dipped on Thursday but remained within sight of a record high hit the previous day, while speculators sold platinum as they awaited new developments in South Africa's supply problems.

Gold fell to $955.40/956.30 an ounce from $957.50/958.30 late in New York, as investors book profits after the metal rallied to an all-time high of $96.70 on Wednesday on a tumbling dollar and the prospect of US interest rate cut.

Gold has gained around 16% this year on investor demand driven by record high crude oil prices and the possibility of more interest rate cuts, which has raised the metal's appeal as an alternative investment.

The upside target was pegged by dealers at $1,000 an ounce.

“In times of sharp rises in prices, it's a must to remember there are plenty of investors and traders waiting to re-enter on dips,” said Pradeep Unni, an analyst at Vision Commodities in Dubai.

“The Federal Reserve is likely to slash rates further on March 18, propelling gold further north. Multiple closings above $950 would mean sustained gains in coming days.”

The dollar held near record lows against the euro as a sharp drop in durable goods orders and home sales fuelled recession concerns while Fed Chairman Ben Bernanke signaled a readiness to cut interest rates again. “It's clear that investor interest in commodities as a whole remains very strong with particular interest from the pension funds who look for returns in commodities when many other markets are either too volatile or are falling,” said Investec Australia.

In the physical sector, selling back from retail investors in Japan slowed down on expectations there was room for gold to rise further, while dealers in Singapore noted light selling from jewelers in Indonesia and Thailand.

Gold bars were offered at a discount of 25 US cents an ounce to the spot London prices in Tokyo, unchanged from last week.

In other precious metals, silver was off a 27-year high, palladium fell below Wednesday's 6-1/2-year high, while selling in Japanese futures put pressure on cash platinum.

Platinum slipped to $2,097/2,105 from $2,130/2,140 an ounce late in New York. It hit a record of $2,192 on February 22 in another round of speculative buying as persistent power supply problems disrupted mining in South Africa, the world's main producer.

“Recently, we haven't heard any fresh news from South Africa. That's why speculators decided to take profit,” said a dealer in Tokyo.

“The Tokyo stock market is also falling sharply, which triggers selling in other TOCOM contracts. I guess speculators want to get some cash,” he said.

The most active February 2009 contract on the Tokyo Commodity Exchange tumbled by ¥240 per gram limit to end at ¥7,107, with a firmer yen against the dollar also spurring liquidation.

Silver fell to $19.12/19.17 an ounce from $19.22/19.27 an ounce, after touching a 27-year peak of $19.45 on Wednesday. Palladium fell to $541/546 an ounce from $550/555 late in New York on Wednesday. (Reuters)