Gold slips in Europe

Gold slipped on Thursday as the dollar rebounded against the euro after European Central Bank president Jean-Claude Trichet said he expects growth to weaken this year. Platinum steadied after a rise in prices fuelled by strike action in South Africa on Wednesday ended a three-session slide that drove prices down some $180 an ounce to six-month lows.
Gold slid to $872.10/873.10 an ounce at 1405 GMT from $878.70/879.90 late in New York. Earlier this week the precious metal dropped to a seven-week low as part of a broader commodities sell-off fuelled by a firmer dollar. The euro slipped against the dollar after ECB president Jean-Claude Trichet said he saw downside risks to economic growth in the eurozone, reducing the prospect of a rate hike in the near future.
"There is less and less likelihood that the ECB will hike rates... and of course that is weighing on the euro," said Dresdner Kleinwort consultant Peter Fertig. "(That) leads to a firmer US dollar, which is negative for gold." "As we fully expect that the euro is going to weaken considerably, we expect gold will remain under pressure," he added.
Gold typically moves in the opposite direction to the dollar, as it is often used as a hedge against weakness in the US currency. Oil, the other main external driver of gold, climbed more than $2 a barrel, recovering from three-month lows, as supply concerns fuelled buying, outweighing fears slowing US economic growth could dampen demand.
Analysts fear gold prices could be set to lose a key source of support as the rate slows at which miners buy back gold they have sold forward. The process, known as dehedging, has been a key source of demand in recent years. Gold miners cut their hedging positions by 16 percent in the second quarter of 2008, but the rate of dehedging is likely to slow in the second half of the year, a report sponsored by Fortis Bank said on Thursday.
Among other precious metals, platinum posted small losses in sympathy with gold, but was largely steady after Wednesday's price rise, which snapped a three-session, $180 run of losses. While traders remain worried about the outlook for the car industry, source of 50 percent of platinum demand, Wednesday's strike among South African workers has refocused attention on supply issues.
Spot platinum edged down to $1,585.50/1,605.50, from $1,594.50/1,614.50 late in New York on Wednesday. Spot palladium was little changed at $347.50/355.50 an ounce from $349.50/357.50 late in New York. Silver slipped to $16.23/16.29 an ounce from $16.51/16.57.