* Gold rises as dollar weakens after Fed rate decision
* Euro zone weakness seen limiting dollar losses
* Gold Fields shuts one shaft of Kloof mine after fatalities
(Recasts, updates prices, adds comment, pvs SINGAPORE)
LONDON, June 26 (Reuters) - Gold rose 1.5 percent in Europe
on Thursday, supported by a softer dollar after the U.S. Federal
Reserve's decision to leave interest rates unchanged, and as
traders scaled back expectations for further rate rises.
Gold <XAU=> rose to $893.90/894.90 an ounce at 0959 GMT from
$879.60/880.60 an ounce late in New York on Wednesday, when it
dropped to its lowest level in a week -- $873.50 -- due to
weaker oil prices.
"Gold is only really moving with the dollar at the moment,"
said Fairfax analyst John Meyer. "Sentiment is still that the
dollar will continue to weaken for a while."
The Fed, after opting to hold interest rates steady after
its meeting on Wednesday, expressed greater confidence over
growth and said that while inflation remains a problem, rising
prices should moderate later in the year.
U.S. interest rate futures suggested expectations for an
rate hike in August fell to 33 percent in the wake of the Fed's
comments from 48 percent prior to the decision.
The dollar slipped to a two-week low against the euro
following the Fed announcement, although it has since steadied.
[]
But while prices remain firm, gold is unlikely to find much
impetus to push higher in the near future and should remain
rangebound under $900 an ounce, said Standard Bank analyst
Walter de Wet.
Demand is likely to remain sluggish over the summer, he
said, while weakness in the euro zone should limit losses in the
dollar.
"Although the European Central Bank is likely to push up
interest rates, we think the exchange rate is pricing that in
already," he said. "So from the exchange rate perspective, there
is not a lot of impetus for gold to move higher."
Towards the autumn, he added, the market could pick up again
if there is no let-up in the problems affecting the financial
sector and if the dollar weakens further.
"We'll have to see some substantial dollar depreciation, as
well as some increased risk in the financial system (to) push
gold to $1,000 again," he said.
Oil, the other main external driver of gold prices, was
steady above $134 a barrel, after slipping yesterday as the U.S.
Dept of Energy reported an unexpected rise in stockpiles.
[]
In industry news, Gold Fields Limited <GFIJ.J> said it has
shut down a shaft of its Kloof Gold Mine in South Africa after
two employees were killed early on Thursday following an earth
tremor. []
It is unclear how much production will be affected by the
closure. Output of the Kloof mine in its entirety stood at
175,500 ounces in the quarter to end March from 330,800 ounces
in the preceding quarter.
Meanwhile spot platinum <XPT=> rose to $2,036.00/2,056.00 an
ounce from $2,004.50/2,024.50 late in New York.
The white metal has bounced back from the near two-week low
it hit yesterday as oil prices slid. However, with the outlook
for the automotive industry - a key user of platinum - remaining
relatively sluggish, the metal could remain under pressure.
"Weaker final demand is preventing platinum from rallying,"
said Standard Bank in a weekly report yesterday. "We expect this
trend of lower vehicles sales in major markets to continue over
the coming months."
"Given that we do not anticipate any new supply problems for
platinum, the main driver for prices will have to come from
investment demand," they added. "This in turn is likely to
depend on the US dollar depreciating towards $1.60."
Among other precious metals, spot palladium <XPD=> edged up
to $462.00/470.00 an ounce from $460.00/468.00 an ounce, while
silver <XAG=> rose to $16.89/16.95 an ounce from $16.56/16.62 an
ounce.
(Reporting by Jan Harvey: Additional reporting by Raissa
Kazolowsky: Editing by Peter Blackburn)
