Gold slips in London

Gold slipped in Europe on Tuesday after trading in a narrow band, but analysts and traders said the metal should gain in the near term on a dollar decline. Prices sat in a tight $3-an-ounce range most of the day, before drifting to $624.20/625.20 an ounce by 1543 GMT, down slightly from Monday's close in London of $626.00/627.00.
"Physical business is still subdued. That shows that much of the price move, which we have seen recently, is more investor-driven," said Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus.
"I am relatively cautious for the first quarter and then (see) a turnaround in the second quarter, and may be considerably higher prices towards the end of the year. A lot of fundamental factors speak for gold." A Reuters poll of 42 analysts from around the world forecast a median price for gold of $651.25 in 2007, up 6.4 percent on 2006, due mainly to expectations of dollar weakness.
But its performance will be far less impressive than in recent years and the average was down nearly 6 percent from the 2007 forecast in the previous poll undertaken in July last year. Silver, by far the top performer in 2006, also had the strongest growth potential in 2007, while platinum was seen down one percent and by another nine percent in 2008.
Dealers said currency and oil markets might offer direction in the near term. Gold often moves in the opposite direction of the dollar and is generally seen as a hedge against inflation. "Underlying sentiment is still friendly, especially after it managed to hold around the lower levels," one trader said. "I personally think it needs another washout before trying to climb again."
Gold fell very close to $600 at the start of the month, before bouncing, but has since stalled three times around $627. The euro was little changed against the dollar on Tuesday afternoon, while oil fell below $53 a barrel after Saudi Arabia's oil minister said Opec production cuts were working well and there was no need for an emergency meeting of the producer group.
Jewellers from around the world said on the sidelines of an international jewellery fair in Italy they were cautiously optimistic about a market recovery in 2007 after price volatility hit sales last year.
That optimism was echoed by exporters in Turkey, the world's second biggest exporter after Italy, who felt the worst was over in terms of falling demand. Jewellery exports from Turkey fell over 22 percent in 2006, hurt by high and volatile gold prices.
Platinum shrugged off news of further potential supply disruption. Lonmin, the world's third-biggest producer of the metal used in car exhaust systems and jewellery, said rebuilding a damaged furnace would slash its first-half metal sales by around 40 percent. Spot prices hit a high of $1,147, before retreating back to $1,140/1,146 an ounce, down from $1,144/1,149 previously. Silver slipped to $12.63/12.70 an ounce from $12.84/12.91, while palladium rose to $331/336 from $329/333.