Gold fell sharply in thin trade on Wednesday afternoon in Europe, with liquidation hastened in thin volumes by the euro's retreat from earlier record peaks versus the dollar, dealers said. Spot gold was quoted at $439.45/440.20 per troy ounce by 1512 GMT, compared with $443.90/444.60 late in New York on Tuesday. The metal was fixed on Wednesday afternoon at $440.25.
The euro briefly set a record high against the dollar $1.3646 - marking a fresh peak for the fifth session running before it stepped back to $1.3608.
Dealers said that while the dollar's respite against the euro dented the allure of gold for non-US investors - bullion's journey south was temporary. "I don't expect it to trade much lower. Given the overall dollar weakness, gold looks still cheap...this might encourage some bargain hunters and help the metal to crawl higher again," a European dealer said.
He said however that gold would need to strengthen through $440 again in order to decrease downward momentum.
Dollar weakness has been the dominant factor behind gold's three-year run upwards, with prices reaching their highest in 16-1/2 years this month at $456.75 as worries about the ability of the United States to fund its ballooning twin deficits weighed on the currency.
"With trading volumes still very thin ahead of the New Year gold is likely to find tough resistance ahead of $448-450 with support seen at $438-40," James Moore of TheBullionDesk.com said in a daily report.
Bullion dealers have said they expect the metal to head higher in 2005, with some seeing prices reaching $500.
In other precious metals, silver edged up to $6.99/7.02 from $6.95/6.99 late in New York on Tuesday.
Platinum saw speculative buying in thin trade, with spot prices rising to $867.00/871.00 from $865.00/870.00 previously. Palladium eased to $182.00/186.00 from $185.00/190.00.
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