Gold price rises on softer dollar, while platinum, palladium at multi-year lows

London (Aug 4)   Gold rose on Tuesday as the dollar weakened after soft US economic data, while platinum and palladium hit multi-year lows on oversupply and sluggish autocatalyst demand.

Platinum dipped to its lowest since January 2009 at $940.50 an ounce, while palladium hit a near three-year low of $586.30/oz.

"Miners continue to increase production in a market that is already oversupplied and only significant cuts would help platinum and palladium prices recover," Bank of America-Merrill Lynch analyst Michael Widmer said.

Both metals, mainly used in catalysts to clean up vehicle exhaust emissions, were further pressured by a private survey on Monday that showed China’s factory activity shrank more than initially estimated in July.

"Industrial metals were hit hard in the wake of yesterday’s poor Chinese manufacturing data and headlines that the Chinese auto industry is facing significant headwinds," MKS PAMP said in a note.

The metals have also suffered from a sharp drop in gold prices — which they tend to track — over the past month on a rising dollar and expectations of an increase in US interest rates.

Spot gold was up 0.7% at $1,092.33/oz by 9.37am GMT, not far from $1,077 — a trough hit on July 24 that was the weakest level since February 2010.

US gold for December delivery was up 0.3% at $1,092.10/oz.

A softer dollar helped relieve the pressure on gold. It was down 0.2% against a basket of currencies, pegged back by US factory activity and consumer spending data on Monday that suggested the world’s largest economy may have lost some momentum in the past two months.

Despite weaker data, economists believe the US central bank could still be on course to lift rates this year. The next main macroeconomic event is the release of US nonfarm payrolls data on Friday.

An improving labour market could strengthen the dollar further, indicating more price losses for non-interest-bearing gold. The metal lost nearly 7% in July, when investors sharply cut their exposure to bullion.

"In the run-up to the first Fed rate hike it is going to be difficult for gold to rally ... gold has been in a four-year bear market already and we can’t see any sustained driver that would take prices higher," Mr Widmer said.

Spot silver rose 0.3% to $14.52/oz.

A key global commodities price benchmark sank to a 12-year low on Monday as fears about a hard economic landing in China and a global glut deepened.