Gold edged lower on Monday as investors exited positions after mostly upbeat U.S. data signalled that the economic recovery is gaining traction, while a dip in stock markets and a stronger dollar added pressure.
Platinum group metals outperformed, with palladium hitting its highest in 17 months and platinum a four-month high, following strong U.S. auto sales reports for January and a downbeat earnings statement from major platinum miner Anglo American Platinum.
Spot gold eased 0.1 percent to $1,664.51 an ounce by 1301 GMT, while U.S. gold futures for April delivery were down 0.3 percent to $1,665.10 an ounce.
In Japan, benchmark gold on the Tokyo Commodity Exchange hit a record high on the back of a weak yen on expectations the Bank of Japan will continue loosening monetary policy.
A dip in stock markets and the euro removed some support for gold, while data released Friday showed hedge funds and money managers had slashed gold's net length in futures and options last week on signs of a steadily improving U.S. economy.
Its losses were limited by buying interest in Asia as China approached a week-long Lunar New Year holiday that starts on Saturday, Feb. 9, but traders said this support was likely to be temporary.
"Physical demand is reasonably good because the Chinese New Year is round the corner and will continue to hold the market this week, but next week Asian markets will be on holidays and that source of support will disappear," Bernard Sin, senior vice president at MKS SA, said.
"Markets may react dramatically."
Gold players were seen reassessing their positions after last week's mixed U.S. economic data failed to provide a clear direction for the market, analysts said.
U.S. payrolls numbers surprised to the downside, triggering a $10 jump in the metal, but these were offset by strong consumer confidence and ISM manufacturing numbers, and comments from a Federal Reserve official suggesting that monetary easing could be scaled back later this year.
"The weaker-than-expected Q4 U.S. GDP data served to prove how negative data could quickly push gold prices higher, but equally the absence of both a solid floor set by physical demand and strong investor conviction shows how quickly gains are surrendered," Barclays Capital said in a note.
"Gold is without structural support at the moment, but given speculative positioning remains relatively light, weaker-than-expected macro data could quickly spur prices higher amid global balance sheet expansion."
PLATINUM, PALLADIUM CLIMB
Platinum group metals posted hefty gains after U.S.