Gold held at around $1,360 an ounce on Monday, stabilising after posting a second successive weekly fall last week, as a stronger dollar tempered some of the gains made from consumer demand for bullion. The gold price has retreated by more than 4 percent since the start of the year, driven lower by declining investment, renewed optimism over the US economic outlook and a more robust dollar, which undercuts gold's appeal to non-US buyers.
Holdings of gold in the world's largest bullion-backed exchange-traded fund fell to their lowest since June 3 on Monday, while speculators cut their holdings of US gold futures to their lowest since April 2010 last week. Spot gold was last almost unchanged on the day at $1,360.50 by 1555 GMT, having touched a one-week low of $1,354.99 on Friday and having fallen by more than US gold futures which were down 0.1 percent at $1,359.70.
With world stocks hovering at around 28-month peaks, coal prices rising after floods in major miner Australia and US crude oil futures around their highest in over two years, gold has been sidelined in favour of more risk-linked assets. "There's been far more interest going on in things like coal, in food and even in the base metals," said Peter Hillyard, director, commodity sales at ANZ.
"Gold's been a laggard compared to the others and I think the investor community has very little going on in gold and has switched its attention to other commodities." The euro fell broadly on Monday as hopes faded for an immediate top-up to the eurozone's bailout fund and investors assessed a recent rise in interest rate expectations. The dollar edged up against a basket of currencies, although traders said a public holiday in the United States would likely restrict liquidity in the European afternoon.
"If you take a three to 12-month view, it will still be at higher (price) levels, but in the short term, gold is going to find it difficult to rally," said Standard Bank analyst Walter de Wet.
A raft of data from China, including inflation and economic growth are due on Thursday and could shed some light on how vigorously policy-makers will have to adjust rates. Physical demand for gold stayed robust ahead of the Lunar New Year celebrations in early February, and bargain hunting materialised in the Asian market after prices dropped and spot supply remained tight, dealers said.
But the combination of a stronger dollar, weaker investment interest and rising bond yields, especially in the United States, have undermined some of the positive sentiment that resurfaced late last year towards gold. "The market mood feels a lot more negative than the price action so far. After all, gold remains just $70 from its all-time highs," wrote UBS strategist Edel Tully.
With gold looking more fragile, silver also came under pressure, falling for a third day in a row, by nearly 1 percent to its lowest in a month. Spot silver was last at $28.28 an ounce, compared with $28.42 late in New York on Friday. Platinum came under pressure, declining by 0.3 percent to $1,803.24 an ounce, but remained within 1 percent of last week's 30-month high at $1,826.74. Palladium pared earlier losses to turn flat at $790.97, having risen last week to its highest in 10 years.