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By Frank Tang and Jan Harvey
NEW YORK/LONDON, June 4 (Reuters) - Gold ended lower on
Wednesday, as weaker crude oil prices and a stronger dollar
dented bullion's appeal as an alternative investment.
Spot gold <XAU=> dropped as low as $875.85 an ounce and was
last at $878.30/879.70 an ounce by New York's last quote at
3:30 p.m. EDT (1930 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."
U.S. active gold contracts for August delivery <GCG8> on
COMEX division of New York Mercantile Exchange settled $1.70
cents lower at $883.80 an ounce.
Further weakness in oil prices, which lowered bullion's use
as a hedge against inflation, could still put pressure on the
metal that traded in tight ranges this week.
"Right now gold is flagging out on the chart. Probably we
will have more sideways actions in the near term, and crude oil
is definitely for sale now," after its recent slide," said
Jonathan Jossen, independent COMEX floor trader in New York.
U.S. crude futures <CLc1> ended $2.01 lower at $122.30 a
barrel, denting gold's appeal as a hedge against oil-led
inflation.
The dollar edged higher against a basket of major
currencies on Wednesday, supported by U.S. data showing a
surprise rise in private sector jobs and an unexpected
expansion in the U.S. services sector.
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 in 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 with 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
$1,982/2,002 an ounce from $1,992.50/2,012.50 late on Tuesday
in New York.
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."
Palladium <XPD=> slipped to $423.50/431.50 an ounce from
$429/437 late in New York on Tuesday, while silver <XAG=> edged
up slightly to $16.80/16.86 an ounce from $16.77/16.84.
(Additional reporting by Atul Prakash in London; editing by
Jim Marshall)
