London: Gold edged down on Friday as investors booked profits after a 10-day high hit in earlier trade yet remained set for its biggest weekly gain in more than a year.
Bullion still attracted physical buying in Asia even though the price had rebounded some 75% from a two-year trough of $1,321.35 hit last week, with dealers reporting a shortage in gold bars, coins and nuggets.
China, the second-largest gold consumer after India, will be on holiday for three days next week for the May Day break, possibly removing significant physical support from the market, traders said.
Gold rose to its highest since 15 April at $1,484.81 an ounce in Asian trading, but came under pressure later, down by 0.3% to $1,461.84 by 3.15 pm (0945 GMT).
It was poised to post a gain of around 4% for the week having posted its biggest daily rise since June at 2.5% on Thursday.
US gold futures for June delivery rose as high as $1,484.80 an ounce before falling back to trade unchanged at $1,461.60.
“This has been pretty much a physical-driven market for the past few days, and with Chinese players being on holiday next week, the market is looking at some reduction in demand and I guess on the back of that you have a bit of profit-taking at the moment,” MKS head of trading Afshin Nabavi said.
“The market rallied quite strongly on Thursday and we thought we would have seen some easiness in the physical market, which hasn’t been the case and there still seems to be some tightness in the market, which puts the $1,500 level on the cards.”
Nabavi said there hadn’t been the same kind of shortage for prompt delivery since 1998, when India officially opened up imports.
Premiums for gold bars in Hong Kong jumped to at their highest level since October 2011 this week, at up to $3 an ounce to spot London prices, partly because of an increase in buying interest from China.
Premiums in Singapore stayed at their highest since October 2008 at $3 an ounce to the spot London prices on demand from Indonesia, Thailand and India.
The market was awaiting US GDP numbers for the first quarter later in the day.
“Today is Friday, at the end of a major up week, so we may see some profit taking and of course we have the US GDP figures this afternoon, which no doubt will be watched closely,” Marex Spectron said in a note.
“However, the spectre of more/less QE does seem to have taken a back seat over the last week or two (and) gold finally seems to be driving itself.”
In other markets, European shares opened lower, with disappointing earnings encouraging investors to book profits after five sessions of gains.
The dollar fell against the yen after the Bank of Japan left policy unchanged, and was steady against the euro below a near-three-week high hit earlier in the week.
ETF holdings down
A daily drop in exchange-traded funds’ holdings suggested that gold investors were still licking their wounds after bullion’s historic fall last week.
Holdings of the largest gold-backed exchange-traded fund, the SPDR Gold Trust, dipped 0.25% to 1,090.27 tonnes on Thursday from 1,092.98 on Wednesday. Currently, holdings are at their lowest level since September 2009.
“Heavy disinvestment from ETF investors is being offset by strong physical demand in key markets such as India and China, but neither of these is likely to continue indefinitely, and which runs its course first could determine whether the (gold) price moves $100/oz higher or lower,” Macquarie said in a note.
Silver fell 1.2% to $24.04 an ounce, having earlier risen to a 10-day high of $24.82. It is set for its highest weekly gain since January.
The gold/silver ratio remained high on Friday with an ounce of gold currently buying around 60 ounces of silver, compared to less than 32 ounces in April 2011.
Platinum gained 1.2% at $1,482 an ounce, while palladium was down 0.7% at $675.47 an ounce.