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Gold eased slightly in Europe on Thursday as the dollar firmed a touch against the euro ahead of a European Central Bank policy decision later in the session, denting interest in the metal as an alternative asset. Traders are eyeing a raft of US data due later, including retail sales, business inventories and import/export prices for December and weekly jobless claims for clues as to the dollar's next direction.
Spot gold was bid at $1,135.20 an ounce at 1212 GMT, against $1,137.60 late in New York on Wednesday. US gold futures for February delivery on the COMEX division of the New York Mercantile Exchange eased $1.00 to $1,135.80. "The market is a bit cautious ahead of the ECB press meet and retail sales figures," said Pradeep Unni, senior analyst at Richcomm Global Services. "The US data is expected to come in weaker, so the dollar may give up some of its gains."
The euro edged lower versus the dollar on Thursday, with investors cautious ahead of an ECB policy decision and news conference by its president Jean-Claude Trichet. No change is expected to euro zone interest rates or the rate outlook, but the central bank's view on Greece's fiscal troubles will be a focus. The dollar-euro is likely to remain the chief price driver for gold, analysts said.
"We continue to see potential for additional near-term weakness (in gold), particularly if, as we suspect, there is a continuation of the US dollar rally that began in December," said Numis Securities in a note. "The decisive break through $1,000 an ounce could now provide a solid floor to any correction, although we would not be surprised to see some panic/stop-loss selling if this level is breached."
Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation. Interest in the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, was steady on Wednesday, having declined nearly 18 tonnes since the New Year. On the production side, gold output in South Africa, the world's third largest miner of the precious metal, fell 4.9 percent in November, Statistics South Africa said.
Among other precious metals, silver was bid at $18.48 an ounce against $18.59, while platinum was at $1,577 an ounce versus $1,574. Palladium bucked the static trend of the other metals to rise nearly 3 percent to $433.50 versus $421.50, however.
The platinum group metals are being underpinned by fresh investment interest after the launch of new platinum- and palladium-based ETFs in New York last Friday. The funds added 170,000 ounces of metal in their first two trading sessions. Interest in platinum group metals-backed ETFs could detract attention from similar products backed by gold, like the SPDR fund, Goldman Sachs said in a research note.

Copyright Reuters, 2010

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