Gold rose on Thursday, sustained by an increase in exchange traded product (ETP) holdings, stronger physical demand and a weaker dollar, but investor selling to cover losses in other markets limited gains. Platinum and palladium fell as the market fretted about a loss of demand due to car plant closures in Japan after the earthquake. Platinum and palladium tumbled to 3-1/2 month lows of $1,654 and $684.50 an ounce respectively, before recovering.
Spot gold was bid at $1,401.45 a troy ounce at 1516 GMT from $1,398.70 late in New York on Wednesday. Earlier this week gold fell to a one-month low of $1,380.90. US gold futures for April were up $5.9 an ounce to $1,402 an ounce. Gold was little moved by US data that showed higher inflation, falling jobless claims and a dip in industrial production (IP).
"Gold is pretty much moving along with the dollar," RBS analyst Daniel Major said. "And I think certainly when we've got a number of much larger concerns than a small miss on IP...that's the reason why asset prices aren't reacting to the data itself." The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings edged up to 1,217.295 tonnes by March 16 from 1,212.745 tonnes by March 15, their lowest since May of last year.
"With gold dropping below $1,400 we continue to see good demand in the physical market. At levels above $1,430 we see scrap coming to the market," said Walter de Wet, analyst at Standard Bank. "There's been consistent liquidation ... since last week, following the earthquake." Premiums for gold bars rose to as much as $2 an ounce in Tokyo, double from earlier this week, as a record-high yen boosted demand and supply tightened.
"Concerns remain that rising commodity prices could feed into higher inflation, particularly in Europe (where) headline inflation is already a concern," ANZ said in a note. "Gold is expected to benefit in a higher inflation environment." Spot silver was at $34.18 an ounce from $34.20 late on Wednesday. Platinum was at $1,700.49 an ounce from $1,686.50 and palladium at $714.72 from $694.50.
Part of the reason for the recovery in the platinum group metals (PGM) was news on Wednesday that car maker Nissan Motor said it would restart operations at a plant in Japan. Japan's nuclear crisis has hit demand for PGM, with some of the world's top auto makers forced to halt production of vehicles that use the metals for autocatalysts. Many other plants are still shut and may remain so for some time. Japanese auto makers, led by Toyota Motor Co, are struggling to restart production amid a shortage of parts and workers. "The PGMs have been significantly affected by the economic dislocation in Japan and disruption to Japanese auto output," HSBC said in a note.
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