A spate of interest rate decisions, including that of the European Central Bank on Thursday, are set to influence the currency markets, and key U.S. non-farm payrolls numbers will be released on Friday.

Spot gold slipped to $773.05/775.05 an ounce at 1000 GMT from $781.50 an ounce in New York late on Tuesday.

“This is a big week for news, and a lot of people will be on the sidelines ahead of that,” Afshin Nabavi, head of trading at MKS Finance, said. “This is going to be a very illiquid market.”

Gold is often bought as an alternative investment to the dollar and typically moves in the opposite direction to the U.S. currency. The dollar strengthened against the euro on Wednesday as traders bet on a euro zone rate cut.

The currency markets remain jittery ahead of rate announcements from the ECB, the Bank of England and the Reserve Bank of New Zealand on Thursday.

Gold shrugged off a move higher in oil prices, with inflation fears tempered by crude’s sharp dip at the beginning of this week.

U.S. crude futures are currently up on the day, but are trading some 13 percent below the level they hit early on Monday. Traders are awaiting U.S. stockpiles data due later in the session.

Physical offtake of gold is also slowing, traders said. In India, the world’s largest bullion market, domestic gold buying declined as well-stocked traders awaited further price falls.

“We have many buy orders at $750 (an ounce) levels,” a dealer at a Mumbai bank said.

Among other precious metals, spot silver tracked gold lower to $9.38/9.46 an ounce from $9.54.

CAR SALES TUMBLE

Platinum prices rose, recovering some of this week’s up to 10 percent losses. The metal slipped sharply on fears over falling sales by automakers, the main consumers of platinum used to make autocatalysts.

Data released on Tuesday showed U.S. car sales tumbled nearly 37 percent in November, the 13th consecutive month of falls, to their lowest level since 1982.

Sales at GM and Chrysler fell 41 percent and 47 percent respectively in November. Carmakers said there was no sign demand would rebound in the next six months.

However, with platinum having already fallen two-thirds from the highs it hit in March and much of the bad news already priced in, the market showed little reaction to the news.

“The platinum group metals market has come to expect the worse, and much of this bearish news has been priced in already,” Standard Bank analyst Walter de Wet said.

A top lawmaker predicted Washington will approve a bailout plan for U.S. automakers after they submitted survival plans to Congress, and both GM and Chrysler said they needed an immediate cash injection to avoid failure.

Spot platinum rose to $803.50/823.50 an ounce from $796 late on Friday, while its sister metal palladium was little changed at $171/176 an ounce against $169.

A Reuters survey showed platinum, palladium and silver are expected to record sharp price falls in 2009 as demand sags in line with economic growth.

By Jan Harvey
LONDON, Dec 3 (Reuters)

The dollar rose against the euro on thin trade on Friday, as weak equities markets and fears of a deepening global recession led investors to seek the U.S. currency as a haven.

Worries about consumer spending helped weigh on U.S. and European shares, while the low-yielding yen gained ground.

Extreme risk aversion and repatriation flows have been supporting the U.S. currency recently.

The euro weakened against the yen and sterling on growing expectations that slowing euro zone inflation may lead the European Central Bank to cut interest rates more aggressively next week from the current benchmark rate of 3.25 percent.

Trading volumes were lower than usual as U.S. markets reopened for only half a day after Thanksgiving Holiday.

“Trading is very thin, with the dollar getting support from a drop in global equities and fear the start of this shopping season is going to be really bad,” said Greg Salvaggio, a currency trader at Tempus Consulting in Washington D.C. “Euro/dollar is going to be stuck in a narrow trading range between 1.26 and 1.30 for now.”

In mid-morning trading in New York, the euro was 1.1 percent lower at $1.2746 , while the dollar was up 0.7 percent against a basket of six currencies at 86.378.

Some traders also mentioned sizable month-end dollar buy-orders at the London (1600 GMT) currency fixing was adding support to the U.S. unit.

Political jitters may also have helped the dollar after militants killed more than 100 people in Mumbai, India’s financial center, in coordinated attacks.

“It’s another ‘negative’ looming in the markets,” said Salvaggio. “It may also be giving a bit of a lift to Treasuries and the dollar this morning.”

Looking ahead to next week, markets were bracing for interest rate decisions by several central banks next week, including the Bank of England, the ECB, the Reserve Bank of Australia and the Reserve Bank of New Zealand.

Provisional figures showed euro-zone annual inflation slowed to 2.1 percent in November from 3.2 percent in October.

“The ECB seems to be lagging behind the curve. Now that the region has officially hit a recession, it is possible that they will be more aggressive in easing rates,” said Kathy Lien, director for currency research at GFT Forex in New York.

“The only factor holding them back is inflation pressures. Although producer and consumer prices have been easing, the central bank is not entirely convinced that the upside risks to prices have alleviated,” she added.

The euro dropped 1.2 percent to 121.58 yen , while the dollar was little changed at 95.42 yen .

For the UK, economists polled by Reuters on Thursday expect the BoE will follow up November’s 150 basis point interest rate cut with at least a 50 point reduction when it meets next week.

“The Bank of England has been the most aggressive and proactive of the G-10 central banks in their attempts to ease monetary policy,” Lien said. “With the economy in a recession according to UK officials, interest rates could fall as low as 1 percent if the crisis continues well into the New Year.

By Vivianne Rodrigues
NEW YORK, Nov 28 (Reuters)