(Updates prices to afternoon)
By Lewa Pardomuan
SINGAPORE, June 12 (Reuters) - Gold dropped more than $5 on
Thursday after the dollar bounced against the euro and robbed
the metal of some of its appeal as an alternative investment,
with falling oil prices also adding to selling pressure.
Gold has been volatile this week, hitting its highest in
almost two weeks at $908.70 an ounce on Monday before falling
to a four-week low of $864.15 the following day on weaker oil
prices and expectations of higher U.S. interest rates.
Gold <XAU=> fell to $875.40/876.50 an ounce from
$881.15/882.55 late in New York on Wednesday. Gold has dropped
more than 14 percent since its record $1,030.80 in mid-March.
"We've got a large short short position in oil which could
be squeezed. If that's the case, it'll drag gold prices lower
with it," said Mark Pervan, senior commodities analyst with ANZ
in Melbourne.
"Gold is left at the whim or direction of what happens in
the oil and currency markets at the moment. It's lagging rather
than leading," he said.
Oil <CLc1> fell by more than $1 to below $135.38 a barrel
on Thursday, reversing some of the previous day's $5.07 gains
on a drawdown in U.S. crude oil inventories. <O/R>. In theory,
lower oil prices reduce gold's appeal as a hedge against
inflation. The dollar inched up against the euro,
underpinned by the Federal Reserve's array of tough talk this
week about containing inflation that has spurred expectations
for higher interest rates. <USD/>
"I get a feeling that when you look at the dollar
direction, it's certainly starting to form a bottom. I think
the market is concerned about the dollar starting to firm,"
said Pervan.
Gold could find support at $855 an ounce, which if broken
could drag prices down to $800. Resistance was pegged at $900,
he said.
Gold futures for August delivery <GCQ8> on the COMEX
division of the New York Mercantile Exchange fell $4.0 an ounce
to $878.8.
"We are just watching the dollar. That's all," said Ronald
Leung, director of Lee Cheong Gold Dealers in Hong Kong, who
expected gold to trade in a tight range of $875-$885.
Jewellery makers and other physical buyers were on the
sidelines, having bought gold at around $865 earlier this week,
said Leung. "I think the money is going to the oil market. It's
more exciting."
The most active Tokyo platinum contract for April 2009
delivery <0#JPL:> on the Tokyo Commodity Exchange ended the
morning session 30 yen per gram higher at 6,885 yen.
Spot platinum <XPT=> fell to $2,029.50/2,049.50 an ounce
from $2,032.50/2,052.50.
Platinum powered to an all-time high of $2,290 an ounce in
early March due to supply worries after a power shortage
disrupted mining in main producer South Africa. The price has
since corrected, mainly due to profit taking.
Silver <XAG=> edged down to $16.74/16.81 an ounce from
$16.88/16.95 late in New York. Spot palladium <XPD=> was flat
at $424.50/432.50 an ounce.
Precious metals prices at 0326 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 875.40 -4.15 -0.47 5.13
Spot Silver 16.73 -0.09 -0.54 13.27
Spot Platinum 2029.50 7.00 +0.35 33.52
Spot Palladium 424.50 0.50 +0.12 15.35
TOCOM Gold 3054.00 8.00 +0.26 -0.20
11539
TOCOM Platinum 6885.00 30.00 +0.44 28.96
9281
TOCOM Silver 584.60 4.60 +0.79 8.06
283
TOCOM Palladium 1499.00 7.00 +0.47 10.95
320
Euro/Dollar 1.5481
Dollar/Yen 107.23
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Ben Tan)
