Gold slides in Europe

Gold prices extended early losses to fall below $1,350 an ounce on Thursday, hitting their lowest in two months, as the euro surrendered gains to turn negative versus the dollar, and as investment demand waned. Spot gold fell as low as $1,344.80 an ounce, its weakest since November 19, and was bid at $1,347.10 an ounce at 1400 GMT, against $1,370.05 late in New York on Wednesday.
US gold futures for February delivery fell $22.10 to $1,348.10. Prices came under pressure in early trade after Chinese inflation data showed price pressures were growing more than expected and could prompt the government to step up its approach to tightening monetary policy. "Gold is struggling, very much so," said Saxo Bank senior manager Ole Hansen. "ETF positions continue to be scaled back."
"We have forgotten the importance of the US stock market during this relentless rally over the last couple of months," he said. "If we see a deeper correction now, I think that almost all asset classes will struggle to make any upside progress." Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, continued to decline, falling to 1,251.433 tonnes on January 19, its lowest since May 2010. Its holdings are down more than 29 tonnes so far this year, data on the fund's website showed.
Aside from its role as an alternative to currencies, stocks or bonds, gold is often perceived as a hedge against rising inflation risks, in that it maintains its value even as price pressures erode that of other assets. "Inflation is an emerging market story at the minute and I think it does play into gold and for demand for physical gold throughout the Asian region," said Credit Suisse analyst Tom Kendall.
Premiums for gold bars in Asia are holding around their highest for two years as consumers stock up ahead of the Chinese Lunar New Year in February. Elsewhere silver, which rose by more than 80 percent in price last year due largely to continuous investment, also came under pressure following another outflow of metal from top silver ETF iShares Silver Trust.
Silver was last down 3.27 percent at $27.86 an ounce and has fallen around 10 percent so far this month, putting it on track for its largest monthly slide since June 2009. Platinum meanwhile fell after two consecutive days of rallies that took the price to its highest since July 2008. Platinum was at $1,803.74 an ounce against $1,830.99, while palladium was at $801 against $811.97.