(Recasts, updates with quotes, prices)
By Jan Harvey
LONDON, June 4 (Reuters) - Gold steadied in late European
business on Wednesday after falling nearly 1 percent, as a
slightly weaker dollar against the euro supported the market.
But weaker oil prices, which lowered the metal's appeal as a
hedge against inflation, were expected to put pressure on the
metal that traded in tight ranges this week.
Spot gold <XAU=> dropped as low as $875.85 an ounce before
rising to $882.90/883.70 at 1502 GMT, against $882.90/884.10
late in New York on Tuesday, when it fell almost 1 percent.
"The macro-economic data are still relatively quiet. You
don't have too much news, either from the United States or from
Europe that could drive big changes in the one or the other
direction," said Michael Widmer, analyst at Lehman Brothers.
"Gold is going to be range-bound, compared to where we are
at the moment, but the bias is on the upside."
The dollar traded lower as persistent troubles in the
financial sector stirred doubts about the health of the U.S.
economy. The currency edged up after a report showed more
expansion than expected in the service sector last month, but
slipped again.
Gold often moves in the opposite direction of the dollar as
the metal is generally seen as an alternative investment to
currencies.
The dollar could strengthen if the U.S. Federal Reserve
indicates a rise in interest rates is on the cards to keep
inflation under check.
"A stronger dollar would undoubtedly be an impediment to
gold, but in fundamental terms the situation remains sound,"
Commerzbank said in a daily report, referring to a sharp drop in
gold output in South Africa.
FALLING OUTPUT
South Africa's Chamber of Mines said on Tuesday the
country's gold production fell 15.6 percent to 52,228 kg in the
first quarter of 2008 compared to the fourth quarter of 2007,
owing to a power shortage. []
On a year-on-year basis, the rate of decline in gold
production was 16.8 percent in the first quarter of 2008.
"We believe the global gold mine supply will remain
constrained this year and elevated gold prices are unlikely to
stimulate a significant supply response, given the challenging
mining environment," said Suki Copper, precious metals analyst
at Barclays Capital.
In other precious metals, platinum prices <XPT=> fell to
$1,980.50/2,000.50 an ounce from $1,992.50/2,012.50 on Tuesday.
While the metal has slipped, analysts said they expected
supply constraints in South Africa, where a power shortage has
crimped output of the metal, and firm demand to underpin prices.
"Near-term industrial demand for the metal should remain
robust with U.S. April factory orders having risen 1.1 percent
against expectations for a 0.1 percent decline and euro zone
(quarter on quarter) GDP growth remaining robust," said Standard
Bank analysts. "This should support near-term prices."
In industry news, South Africa's Aquarius Platinum <AQPJ.J>
said it has received regulatory approval to buy a 50 percent
share in Platinum Mine Resources, which produces some 20,000
ounces of PGMs a year <ID:nL04470895>.
Palladium <XPD=> slipped to $426/434 an ounce from $429/437
late in New York on Tuesday. Silver <XAG=> fell to $16.62/16.68
an ounce from $16.77/16.84.
(Additional reporting by Atul Prakash in London)
(Editing by Christopher Johnson)
