Gold falls from three-week high, palladium off 2001 top

[NEW YORK] Gold turned lower on Monday, pressured by profit-taking after extending gains above the US$1,300 mark to a three-week high amid ongoing tensions over Iran and North Korea as well as recent weak US economic data.

Palladium fell after making another break above US$1,000 an ounce to the highest levels since early 2001 on the back of strong Chinese auto sales.

Spot gold was down 0.6 per cent at US$1,296.51 an ounce by 2.35pm EDT (1835 GMT). US gold futures for December delivery settled down 0.1 per cent at US$1,303.

Spot gold has been rebounding since touching a two-month low of US$1,260.16 on Oct 6, lifted by worries about North Korea and a weak dollar.

"You're seeing a little bit of profit-taking," said Bob Haberkorn, senior market strategist for RJO Futures in Chicago.

"There's a reluctance to take too much off the table because of some of the geopolitical risks that are out there."

World stocks rose on upbeat Chinese data and the US dollar index edged up following disappointing inflation data on Friday.

"Last Friday we had a rather disappointing CPI number, which further enforced the view that there's no need for the Fed to be very aggressive in terms of rate hikes," said analyst Carsten Menke at Julius Baer in Zurich.

Rising US interest rates tend to boost the dollar and push bond yields up, putting pressure on the greenback-denominated, non-yielding gold.

Geopolitical risks, including over Iran and North Korea, are likely to persist this week, Jeffrey Halley, a senior market analyst with Oanda, said in a note.

"This should all combine to ensure that gold maintains a safe-haven tone this week," Mr Halley said.

Palladium was down 1.6 per cent at US$972.10 an ounce after reaching its highest since February 2001 at US$1,010.50.

Some investors had been wary when the metal, mostly used for auto catalysts to clean pollution from exhaust fumes, broke above US$1,000 on Sept 6, due to concern about weak global auto sales.

Those worries seem to have been swept aside after the world's biggest auto market China last week reported sales growth of 5.7 per cent in September.

UBS strategist Joni Teves said palladium's gains were justified by supply/demand fundamentals, which include a market deficit of 830,000 ounces this year.

"This comes after persistent shortfalls over the past five years, which has clearly drawn down considerably on above-ground inventories," she said in a note.

Silver fell 0.7 per cent to US$17.23 an ounce after hitting US$17.46, its highest since mid-September, while platinum eased 1.1 per cent to US$932.80 an ounce.

REUTERS