London:) Gold prices slipped in Europe yesterday to their lowest in nearly a week, caught up in selling of other assets such as equities, oil and the euro, as investors fretted over the outlook for the global economy.
While these concerns are likely to support gold in the medium run, gold is being sold in the short term to cover losses on other markets, analysts said.
Spot gold was bid at $1,218.15 an ounce at 0932 GMT, against $1,223.40 late in New York on Monday. US gold futures for December delivery fell $8.20 an ounce to $1,220.30.
Gold hit a 1-1/2 month high at $1,237.15 an ounce last week as concerns over the global economic recovery fuelled interest in the metal as a haven from risk, but has since retreated.
"Last week as we started to see euro zone risk rise, there was a pick-up in defensive buying out of Europe," said Credit Suisse analyst Tom Kendall. "But with everything else sliding lower, and the dollar coming back a bit, it is struggling."
"But I don't think it is going to struggle for too long with this risk-aversion environment," he added. "Money is going to continue flowing into longer-dated Treasuries and gold."
"This week we've seen some liquidation [of gold] come to the fore on Tocom, with some of the Japanese investors repatriating cash into yen," Kendall noted.
Investors will be closely watching US existing home sales data for July for its impact on the financial markets.
"They are widely expected to fall sharply, reflecting the sharp declines already seen in property deal signings after the expiry of tax incentives to buyers," Credit Agricole said in a note.
"With the mood of the market currently, however, the fact that the drop was expected will not prevent the spin from being gloomy," it added.
Further concerns about the strength of the economic recovery could spark new interest in gold as a safe haven, analysts said.
Silver was at $17.84 an ounce versus $17.93, platinum was at $1,496 an ounce versus $1,504.50 and palladium at $473.38 against $481.
Platinum and palladium are chiefly used in autocatalysts, and have been heavily exposed to the global economic slowdown. However, palladium has slightly outperformed platinum, as its potential for demand growth is seen as stronger.
Palladium prices have slipped only 3.6 per cent this month so far, compared with a more than 4 per cent drop in platinum prices. In the year to date, palladium has risen 16.7 per cent, compared with a 2 per cent rise in platinum prices.
