Gold falls in London

Gold shed more than 2 percent on Wednesday as the dollar gained ground against the euro and oil beat a retreat from record highs, traders said. Spot gold sank to an intraday low of $897.10 an ounce before steadying around 900.20/901.20 by 1428 GMT, well below levels of $920.65/922.05 seen late in New York trade on Tuesday.
People were unwinding their long positions on gold, after the metal's recent rally, said analyst Daniel Hynes of Merrill Lynch: "We've seen net long positions on the COMEX decrease recently and I think we're seeing a continuation of that movement out of gold just at the moment," he said.
Gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed exchange-traded fund, fell to 623.41 tonnes on Tuesday from 641.82 tonnes the previous day.
The metal hit a three-week high of $952.60 last week but attempts to stay above $950 were met by profit-taking. Dealers noted some physical demand but it was not enough to trigger another rally towards last month's record high of $1,030.80. "In the near-term, gold is likely to continue to take its lead from dollar movements," said Suki Cooper, precious metals analyst at Barclays Capital.
The euro pulled back from a record peak versus the dollar after a fall in manufacturing activity suggested that economic growth in the eurozone is starting to slow. A firmer dollar makes gold costlier for holders of other currencies and often lowers bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
Oil eased to under $118 a barrel, but stayed on the boil due to supply disruptions in Nigeria and fears that a refinery strike in Scotland could hit production in the North Sea. "Higher oil prices should increase near-term inflation expectations, which might leave some room for near-term upside potential for commodities," analysts at Standard Bank said.
"However, continued fund liquidation signals that most investors remain on the sidelines because of uncertainty in financial markets. Precious metals should remain range-bound ahead of the Fed interest rate decision due next week." The US Federal Reserve is expected to lower interest rates from the current 2.25 percent.
A rate cut tends to lower the dollar's appeal, which in turn often lifts bullion demand. Platinum fell 2 percent to $1,975.50 an ounce on the back of the declines in gold, and was later at $2,002.50/2012.50 against $2,017.50/2,027.50 previously.
News that Lonmin Plc, the world's third biggest platinum producer, had again cut its full-year sales target following power problems in South Africa had little impact on prices, said Hynes from Merrill Lynch. "I think a large amount of that was already priced into the market.
Other than that there is no real catalyst so it is tending to drift with gold," he said. Platinum also faced pressure from news that Mitsui Mining and Smelting had developed a new catalyst for diesel engine cars that replaces the use of platinum with silver, a less conventional but much cheaper metal. Silver edged down to $17.17/17.23 an ounce from $17.64/17.73, while palladium was off at $445.50/451.50 versus $451/457.