Gold hits two-month low in European trade

Gold touched a two-month low in Europe on Friday, pressured by a firmer appetite for assets seen as higher risk on expectations the economic recovery is gaining traction, but a retreat in the dollar prevented a steeper drop. The metal is heading for a third consecutive weekly loss and its weakest monthly performance since July as a more optimistic view of global economic growth and stability boosted investment in stocks and other assets seen as higher risk at gold's expense.
Spot gold was bid at $1,342.65 an ounce at 1508 GMT, against $1,345.40 late in New York on Thursday. US gold futures for February delivery fell $4.80 to $1,341.70. Spot prices hit a low of $1,337.50 an ounce as financial markets opened in New York, their weakest since November 18, tracking losses in US gold futures. Traders cited a rise in margin requirements for precious metals futures.
More broadly, analysts say outflows from products such as physically backed exchange-traded funds suggest investor appetite for gold is slackening after a run of firmer-than-expected US economic data and as concerns over euro zone sovereign debt levels recede. "There is a real lack of catalysts to provide any sort of support," said Macquarie analyst Hayden Atkins. "Day-by-day the data does seem to be supportive of the theory that activity is pretty good for now, and the expectation is growing that things will be okay through the year."
"Gold used to be a fear indicator, and as this fear appears to be leaving the market, the gold price is under pressure," said Commerzbank analyst Eugen Weinberg. Meanwhile silver prices extended losses to a fresh seven-week low at $27.10 an ounce, pressured by a further outflow from the world's largest silver-backed exchange-traded fund, the iShares Silver Trust. Holdings of the trust fell by just over 10 tonnes on Thursday after recording their biggest one-day drop since late November in the previous session. It has seen outflows of more than 346 tonnes so far this year. Investment demand was a major driver in silver's more than 80 percent price gains last year.
"Industrial demand for the metal remains at risk from substitution, given recent price gains," said Barclays Capital in a report. Silver was bid at $27.32 an ounce against $27.48. Elsewhere, platinum was at $1,820.74 an ounce against $1,808.50, while palladium was at $805.72 versus $808.47.