Spot gold was bid at $932.90 an ounce at 1420 GMT, against $932.35 an ounce late in New York on Thursday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange eased 70 cents to $933.90 an ounce.

Prices awaited new direction from the currency markets, currently the main driver of gold. Gold becomes cheaper for holders of other currencies as the U.S. dollar slips.

“If you are looking at the ups and downs of gold in its narrow trading range, it is more or less a reflection of the swings in the euro/dollar exchange rate,” said Peter Fertig, a consultant at Quantitative Commodity Research in Germany.

The dollar fell broadly as improved U.S. data fuelled hopes of an economic recovery. It later pared gains against a basket of currencies, however.

Moves in the currency remained limited ahead of a two-day Fed policy meeting next week. As long as the currency markets remain rangebound, gold will also be hemmed in.

Factors such as jewellery buying, safe-haven demand and inflation hedging are all likely to remain subservient to the influence of currencies, analysts said.

“Inflation expectations are not there just yet, and the precious metal could see even more losses if equities bounce back up,” VTB Capital said in a note.

“Gold’s attractiveness as a safe haven asset is virtually zero at the moment, which is evident from the unchanged speculative positions in gold futures or ETFs,” it added.

On other markets, European shares extended gains early afternoon, while U.S. stocks opened higher as appetite for equities picked up. Oil firmed a touch after bullish economic data helped the demand outlook.

WIDER MARKETS

Holdings of the major gold exchange-traded funds were stable, as investors awaited clues from the wider markets. Another wave of bad news on the economy could unleash new inflows, however, analysts said.

The U.S. Senate signalled its approval of a long-planned sale of just over 400 tonnes of gold by the International Monetary Fund on Thursday.

UBS analyst John Reade said in a note: “There are lots of uncertainties regarding the sale but we do not expect this to be a negatively disruptive factor to the gold market.”

“If the gold is taken by other official sector buyers (it) could be a very positive development for the market,” he added.

Silver was at $14.22 an ounce against $14.19. Platinum was at $1,206 an ounce against $1,200, and palladiumat $240.50 against $238.

ETF Securities said holdings of its ETFS Physical Palladium fund rose to a record on Thursday, up just over 3,000 ounces or 1 percent to 315,572 ounces. The fund’s reserves are up 10,000 ounces or 3.3 percent week-on-week.

LONDON, June 19 (Reuters

Gold slid more than 3 percent in Europe on Monday as the strengthening dollar knocked the metal’s appeal as a currency hedge, and oil prices retreated from highs.

Other precious metals tumbled in gold’s wake, with silver falling 8 percent, platinum 3 percent and palladium 6 percent.

Spot gold was quoted at $851.65/853.65 an ounce at 1445 GMT, down from $873.20 an ounce late in New York on Friday, having touched a session low of $843.50.

U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange were down $26.60 at $852.90 an ounce, having earlier touched a low of $843.50.

“The dollar is the critical factor today,” said BNP Paribas analyst Michael Widmer.

The U.S. currency extended gains against the euro to a fresh three-week high on Monday on hopes U.S. President-elect Barack Obama will unveil fresh measures to boost the economy.

Obama is due to meet House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid later in the session to discuss their legislative agendas.

Obama officials have been discussing an economic stimulus bill in the range of $675 billion to $775 billion.

The euro has also been battered by poor Italian and Spanish inflation data and tax cuts in Germany, which are expected to add pressure on the European Central Bank to cut interest rates soon.

“Gold’s move in the last couple of days is almost entirely due to the strength of the dollar,” said UBS commodity strategist John Reade. “The number one, front centre driver of the dollar gold price is where euro-dollar is going.”

The euro-dollar exchange rate “moved sharply higher in December and has come off in the first couple of trading days of this year,” he added. “It has dragged gold with it.”

The precious metal had found good support in early trade as oil prices rose nearly 3 percent after an Iranian military commander called for an oil boycott over Israel’s offensive in the Gaza Strip.

However, it has slipped as oil gave up those gains.

Gold usually moves in line with oil prices, both because firmer crude boosts interest in the precious metal as a hedge against oil-led inflation and increases the appeal of commodities as an asset class.

JEWELERY BUYING SOFT

Demand for gold jewelery has been hit by the higher prices. Sales in Abu Dhabi fell 40 percent in December from a month before, the emirate’s industry group said.

Gold buying in India, the world’s largest market for the precious metal, has been crimped by higher prices, traders said.

“People would want to buy if prices fall below 12,500 rupees,” said Mayank Khemka, managing director of Delhi-based Khemka International. Prices are currently around 13,500 rupees.

Among other precious metals, silver slipped in line with gold to a low of $10.54, before recovering to $10.86/10.94 an ounce from $11.52 late on Friday.

Platinum and palladium also fell, with both metals suffering from expectations demand from car makers will continue to fall.

France and Japan posted steep falls in December car sales on Monday, while U.S. auto sales numbers are due later in the session.

Automakers are responsible for around 50 percent of global platinum and palladium demand.

Platinum eased to $925.50/935.50 an ounce from $944, while palladium dipped to $182/187 an ounce from $190.

LONDON, Jan 5 (Reuters)

Gold rose more than 2 percent in Europe on Monday as the dollar slipped to a fresh two-month low versus the euro, boosting interest in the precious metal as a currency hedge.

Gold was held below $830 an ounce for much of the day by technical resistance, but stops were triggered as the rising euro pushed prices higher, leading to a spike to a two-month high of $842.15 an ounce.

Spot gold was quoted at $840.05/842.05 an ounce at 1533 GMT, against $819.90 an ounce in New York late on Friday.

Traders are awaiting an announcement on interest rates from the U.S. Federal Reserve on Tuesday, which will have a significant impact on the foreign exchange market, and consequently on gold.

“On the currency side, the high yield has been dragging euro higher,” said Pradeep Unni, a senior analyst at Richcomm Global Services.

“If the Fed slashes rates again, the yield differentials between the euro zone and Fed would widen further.” The dollar slipped against both the yen and the euro, striking a two-month low against the single currency as traders continued to exit long dollar positions, spooked by uncertainty over the fate of U.S. automakers.

Gold tends to track the euro/dollar exchange rate closely, as it is often bought as an alternative investment to the U.S. currency and tends to move in the opposite direction to it.

The Federal Reserve is widely seen cutting rates by at least 50 basis points on Tuesday after the Federal Open Market Committee’s two-day policy meeting concludes.

“Everyone is banking on a lower interest rate in the U.S.,” said Afshin Nabavi, head of trading at MKS Finance in Geneva. “If the dollar continues to lose value, of course it will benefit gold.”

Oil, the other key external driver of gold, rose nearly 7 percent to $50 a barrel in afternoon trade. Crude prices have been boosted by expectations for a cut in OPEC production later this week.

EQUITIES SLIP

However, equity markets have shed gains, with European shares turning negative in the early afternoon after a lower opening on Wall Street.

U.S. stocks retreated as shares of big-cap tech companies declined while uncertainty over the fate of a possible rescue plan for ailing carmakers also weighed.

Among other precious metals, spot silver tracked gold higher to $10.51/10.59 an ounce, against $10.23 in New York late on Friday.

The platinum group metals benefited from hopes for a bail-out of the U.S. automotive industry. Carmakers are major buyers of PGMs and weakness in the sector has pushed prices sharply lower in recent months.

Major platinum producer Aquarius Platinum said on Monday it will keep its Everest mine in South Africa closed for at least six months.

“A six-month closure would result in 38,000 ounces of lost platinum output and 19,000 ounces of lost palladium output, less than 1 percent of global production of both metals,” said Barclays Capital.

“However, for now the market focus remains firmly centered on demand weakness, which is likely to expose prices to downside risk,” it added.

Spot platinum climbed to $833.50/853.50 an ounce from $805.50 an ounce, while palladium surged to a high of $178, before easing to $173.50/181.50 an ounce, up from $168 late on Friday.

Dollar weakens to two-month low versus euro… Oil climbs nearly 7 percent; OPEC supply cut expected

Jan Harvey
LONDON, Dec 15 (Reuters)