London - Gold prices edged lower on Monday as the dollar held near a one-month high against a basket of currencies, and as investment appetite for the metal was hurt by a sluggish price performance in the year to date.
Asian activity was low during the Lunar New Year holiday, with China, Japan, Singapore, Hong Kong and Korea among the major regional markets that are closed this week.
Gold fell 0.3 percent to $1,662.61 an ounce by 12:05 SA time.
It hit a ten-day high of $1,683.56 on Tuesday, but was unable to hold onto gains on euro weakness and a resurgence in risk appetite, which triggered investor liquidation.
US gold futures for delivery in April dropped 0.2 percent to $1,664 an ounce.
“Gold is going to be pretty rangebound in the days ahead with Asia absent,” Standard Chartered analyst Dan Smith said.
“Gold is really struggling to get any traction despite the fact that the recent physical flows have been pretty strong in Asia as investor appetite is being extremely mixed and people are switching out of gold into other markets like platinum, palladium and even copper.”
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.23 percent to 1326.89 tonnes on Friday from 1329.90 tonnes on Thursday.
But data from the US Commodity Futures Trading Commission could point to renewed interest in the metal as an inflation-hedge. Speculators raised net longs in gold by 4,845 lots to 86,926 in the week to February 5, the CFTC's Commitments of Traders report showed.
On the wider markets, the euro briefly dipped to a two-week low against the dollar on Monday before rebounding. European shares edged lower after a new series of quarterly earning results and Brent oil futures fell.
Some analysts see that gold's relationship with global equities, which the metal has tended to follow in the past few months, is faltering and that gold's investor appeal may be soon restored.
“The relationship between gold and equities has ... eased,” UBS analyst Joni Teves said in a note.
“This suggests that gold's safe-haven properties are currently considered more dominant, and as such gold is considerably lagging the move in equities as its defensive characteristics become redundant in a more optimistic view of the world,” she added.
EURO ZONE MINISTERS SET TO MEET
Analysts were not expecting much news from a euro zone finance ministers meeting later in the day, though markets will be on watch for any discussion on the strength of the euro ahead of the G20 meeting at the end of the week.
Among other precious metals, platinum and palladium held below their highest levels in almost a year and a half, hit last week.
Platinum was up 0.2 percent to $1,716 an ounce, having risen to $1,740 on Wednesday, its strongest since September 2011. Palladium inched up 0.2 percent to $753.97 an ounce. The metal rose as high as $769.50 on Thursday, also its peak since September 2011.
Year to date, platinum group metals have outperformed gold and silver on a combination of supply worries in the world's biggest producer South Africa, as well as a drop in palladium output from Russia, and signs of improved global economy, which bode well for the metals' industrial demand.
“Ongoing cost pressures (in platinum) will push up marginal costs, supporting prices,” analysts at Canaccord Genuity said in a note.
“In the short term, the palladium market looks the tightest and, without Russian stockpile sales, may be the first to swing to a deficit,” they added. - Reuters