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. automakers reported a 14.2 percent sales increase in January from a year earlier, with a seasonally adjusted annualised rate of sales reaching 15.29 million vehicles.
The metals are widely used in auto catalysts to clean up exhaust emissions.
Momentum picked up when major producer Amplats revealed a significant full-year loss on Monday. The company has cut its output target to 2.1-2.3 million ounces a year and has slashed capital expenditure by 11 billion rand ($1.2 billion). It plans to cut capex by 25 percent over the next decade to 100 billion rand.
Spot platinum rose as much as 1.5 percent to $1,705.25, its highest in four months, and was last seen at $1,695.24, up 0.9 percent.
Spot palladium gained as much as 0.7 percent to $759.75, its loftiest level since September 2011, before easing back to $751.50 an ounce, down 0.5 percent.
Platinum has outperformed the rest of the complex with a nearly 11 percent gain so far this year, followed by a 9 percent rise in palladium. Gold is down 0.3 percent - the only precious metal in the red after a 12-year winning streak.
The Commitments of Traders data for the week ended Jan. 29 showed platinum net long positions rising by 171,150 ounces to 2.72 million ounces and palladium net long positions up by 357,500 ounces to 2.6 million ounces.
"Palladium net long positions continue to reach new highs, running the risk of a pullback," HSBC said in a note.
Silver fell 0.8 percent to $31.56 an ounce.