(Updates with quotes, prices after U.S. GDP growth data)
By Atul Prakash
LONDON, Jan 30 (Reuters) - Gold and platinum slipped on
Wednesday as investors took profits ahead of a rate decision by
the U.S. Federal Reserve, which may set market direction.
Spot gold <XAU=> fell to $920.95/921.65 at 1355 GMT from
$928.60/929.30 an ounce in New York on Tuesday, when it rallied
to a record high of $933.10 on expectations of more rate cuts in
the U.S. and fears about South African mine output.
The metal extended losses, despite the dollar slipping
against the euro after a report showed U.S. growth in the fourth
quarter was sharply weaker than expected.
"There has been some talk about restarting gold mines in
South Africa, but it's not a huge move (for gold). I think there
has been some profit-taking on long positions," Dan Smith,
metals analyst at Standard Chartered Bank, said.
"The Fed meeting is going to be critical. The previous 75
basis point cut gave the impression that the Fed is panicking,
which encouraged a lot of interest in gold as a safe-haven. If
the Fed is seen overdoing and panicking, then it's likely to
push gold up again."
The Federal Reserve is widely expected to follow up last
week's emergency 75 basis point rate cut, its biggest in a
quarter century, with another cut of 25 or 50 basis points after
a two-day meeting ending by 1915 GMT on Wednesday.
A rate cut tends to weaken the dollar as investors look for
alternative assets, including gold, for higher returns.
"Today all eyes are on the FOMC meeting and another 50 basis
points rate cut is widely expected. Thus, only a surprisingly
stronger rate cut might be bullish for gold," said Dresdner
Kleinwort, referring to the Federal Open Market Committee.
Investors kept a close eye on other markets, with the dollar
weakening and oil prices holding near a two-week high.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Some analysts advised caution.
"We continue to believe that gold is vulnerable to a
pull-back due to elevated speculative and investment positions
and the gap between the current price and the level where we
believe strong jewellery demand would support the metal," said
John Reade, analyst at UBS Investment Bank.
PLATINUM SLIPS
Platinum <XPT=> dropped to $1,682/1,687 an ounce from
$1,705/1,710 in New York. The metal spiked to an historic high
of $1,735 an ounce on Tuesday before profit-taking kicked in.
Dealers said supply concerns persisted even though South
African miners planned to resume production on Wednesday after
the state power firm promised to boost to boost supplies this
week to mines crippled by outages. []
Anglo Platinum <AMSJ.J>, the world's top platinum producer,
said it had resumed mining at full capacity based on 80 percent
power supplies to its operations, but was not concentrating,
smelting or refining. []
"Platinum is much more fundamentally driven than gold. The
South African situation is critical, given it accounts for
nearly 80 percent of (world) production," Smith of Standard
Chartered said.
"A lot of mines are restarting, which we think is going to
keep the price under pressure for the time being. But we are
long-term bullish. Fundamentally it's still a very tight market
and the quetion is whether the power cuts are going to be
longer-lasting than the most people think."
In other bullion markets, the benchmark Tokyo gold futures
<0#JAU:> ended 6 yen per gram lower at 3,182 yen, while U.S.
February gold futures <GCG8> were down $3.5 at $921.60 an ounce
after surging to record highs of $933.30 in overnight trade.
Silver <XAG=> rose to $16.73/16.78, against $16.68/16.73 an
ounce in New York and Tuesday's 27-year high of $16.80 an ounce.
Palladium <XPD=> dipped to $385.50/388.50 from $389/392.
(Reporting by Atul Prakash; editing by Michael Roddy)
