Gold eased below $1,360 an ounce in Europe on Thursday as the rising dollar pressured prices, and with Asian buying still light after the Lunar New Year holidays.
The metal has fluctuated between $1,340 and $1,370 this week, awaiting fresh direction. While there are currently few incentives to buy gold, given improving appetite for higher risk assets, few investors seem prepared to sell heavily.
Spot gold was bid at $1,357.39 an ounce at 1204 GMT, against $1,362.89 late in New York on Wednesday. U.S. gold futures for April delivery fell $7.60 to $1,358.00.
The world's largest gold exchange-traded fund, New York's SPDR Gold Trust, reported a small outflow on Wednesday, signaling that investment is still lackluster.
Since the beginning of the year we have seen outflows from the ETFs. We have seen lower risk aversion day by day, and today the stronger dollar seems to be also taking its toll, said Commerzbank analyst Eugen Weinberg.
We are still very bullish in the longer term and believe new all-time highs are very possible toward the end of the year. But at the moment, gold seems to not be the favorite. During economic recovery, other metals are in stronger demand.
The euro fell three-quarters of a percent against the dollar as nagging doubts over a lack of concrete policy measures to tackle the euro zone debt crisis hit sentiment and pushed peripheral debt yields up.
A stronger dollar tends to pressure gold, as it curbs its appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies, though the relationship has weakened in the last year.
On the wider markets, European shares continued their retreat from the 29-month highs they hit earlier this week as some corporate earnings reports missed expectations. .EU
ASIAN DEMAND SOFT
In India, the world's largest consumer of physical gold, demand remained soft as buyers awaited fresh price falls. Dealers said suppliers hiked premiums charged on London prices to $2.20-$2.50 as availability was limited by supply issues after heavy snowfalls in refining areas.
Demand in number two consumer China was also muted after the Lunar New Year holiday. Although the festival officially ended on Wednesday, most buyers in China are not expected to return to the market until Monday, dealers said.
Among other precious metals, silver was bid at $29.80 an ounce against $30.17, down more than 1 percent on the day. Platinum was at $1,829.24 an ounce against $1,853.49, while palladium was at $816.25 against $826.47.
Platinum reached its highest in 2-1/2 years on Wednesday and palladium a ten-year peak, amid expectations that rising car demand would lift consumption of the autocatalyst metals. Supply issues are also supportive, analysts said.
Platinum producers face high cost inflation driven by rising labor and power costs and the impact of (rand) appreciation, said Sanford Bernstein in a note.
Platinum prices, unlike other commodities, have also been relatively flat, resulting in falling margins, returns and cash flows. In the short term, low profits and cash flows limit... producers' ability and willingness to invest in new projects.
We believe that supply constraints and likely demand recovery make platinum an attractive commodity in the mid- to long-term, it said.