Gold struck a one-week low on Tuesday, as speculators ditched some holdings following a sharp drop in oil prices and a rally in the US dollar, which reduced bullion's appeal as an alternative investment.
A state of emergency in Thailand, Asia's fourth-largest gold investor, had yet to spur safe-haven buying but dealers saw purchases at lower levels from jewelers in other parts of Asia. Platinum dropped 3% to a one-week low on demand concerns.
Gold fell to $814.20/815.20 an ounce from $817.15/818.75 an ounce late in London. New York markets were closed on Monday for the Labor Day holiday.
“The movements in oil prices and the US dollar have both conspired against gold,” said David Moore, an analyst at Commonwealth Bank of Australia in Sydney.
Oil fell further on Tuesday after slumping more than $4 a day ago on speculation that a surprisingly weak Hurricane Gustav likely spared key Gulf oil infrastructure.
The dollar index climbed 0.8% to 77.75 after hitting an eight-month high of 77.823.
“I do think there's potential for a bounce in the oil price in the short term. It probably needs something to sort of turn around, to give it some assistance,” said Moore.
“One thing that might be relevant to oil markets going forward is the OPEC meeting on September 9,” said Moore, referring to the gathering in Vienna to discuss output policy.
Gold has lost more than 20% in value since spiking to all-time high of $1,030.80 in March, mainly driven by profit taking, oil's falls from record highs and a rebounding dollar.
“There's a bit of buying on the physical side because the price is below $820 but the situation in Thailand has no impact. Oil is still the main factor,” said a dealer in Hong Kong.
Thai Prime Minister Samak Sundaravej declared a state of emergency in Bangkok and gave the army control of public order after a man died in overnight clashes between pro- and anti-government protesters.
Spot platinum dropped to $1,395.50/1,415.50 an ounce from $1,439.00/1,451.00 late in London on concerns about demand for autocatalysts due to poor car sales and a slowing US economy. Prices were below record high of $2,290 hit in March.
“Japanese sales of automobiles in August were below 200,000 cars, so it's very bad figure. The platinum price is under pressure. It's a very bearish factor,” said Kazuhiko Saito of Interes Capital Management in Tokyo.
Saito pegged platinum's downside target at $1,350 an ounce - a level last seen in late August, while gold could potentially fall to $800.
Automobile sales in Japan, excluding 660cc minivehicles, tumbled 14.9% in August year-on-year to 193,902 vehicles. Sales for August fell short of 200,000 vehicles for the first time in 37 years.
Autocatalysts, used to clean exhaust fumes, account for more than 50% of global platinum demand.
The benchmark platinum contract on the Tokyo Commodity Exchange, August 2009, fell ¥176 per gram to ¥4,809. New York gold futures lost $16.30 an ounce to $818.90.
Spot palladium fell to $288.00/296.00 an ounce from $297.00/305.00 an ounce. Silver edged down to $13.35/13.41 an ounce from $13.40/13.46 an ounce late in London. (Reuters)