(Recasts, adds analyst comments, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, June 5 (Reuters) - Gold ended lower on
Thursday in spite of a sharp crude oil rally and weaker dollar,
but bullion should be supported by chart-based strength ahead of
Friday's U.S. payrolls report, traders said.
Gains in bullion were capped by uncertainty over the future
direction of the U.S. currency and by expectations that demand
would remain muted going into the typically slack third quarter,
dealers said.
Spot gold <XAU=> was last at $874.55/875.95 an ounce by New
York's last quote at 2:15 p.m. EDT (1815 GMT), against
$878.30/879.70 an ounce late in New York on Wednesday.
"Gold has come back off lows, but there is still a lot of
caution," said Mitsubishi metals strategist Tom Kendall. "The
market is very sluggish in terms of end-user demand. There is
not a lot of support from jewelry buyers."
Price volatility this year has made jewelers wary of buying
gold, he said.
The precious metal slipped 1.4 percent to an intraday low of
$865.45 earlier, its weakest level in three weeks, as the
stronger dollar dampened interest in the precious metal as a
currency hedge.
The euro touched a three-week low against the dollar after
European Central Bank President Jean-Claude Trichet signaled
euro-zone interest rates could rise as early as next month,
pressuring gold.
Gold typically benefits from a softer dollar, as it is
bought as a hedge against currency weakness.
The dollar had benefited this week from remarks made by
Federal Reserve Chairman Ben Bernanke on the worrying outlook
for inflation.
Bernanke's comments were seen signaling an end to the Fed's
rate-cutting trend and led some analysts to speculate that the
dollar may have reached a turning point after months of
decline.
"We consider (Bernanke's) comments supportive of our view
that the dollar is basing -- especially against European
currencies -- and that this is supportive of our view that gold
peaks this year," said UBS analyst John Reade.
A fall in the price of oil from the all-time highs it
reached last month is also undermining support from gold. The
precious metal benefits from rising crude prices, as it is often
bought as a hedge against oil-led inflation.
"We are going to look at support at levels between $850 and
$860. This is just about as far low as we're going to go. I
don't think the bears are going to be in complete control of
this market," said Ralph Preston, futures analyst with
HeritageWestFutures.com in San Diego.
Preston also cited positioning ahead of Friday's U.S.
payrolls report for gold's weakness.
The U.S. non-farm payrolls data for May are due out Friday,
which are likely to lend fresh direction to the currency, for
clues as to the future direction of trade, analysts said.
Among other precious metals, platinum <XPT=> rose to
$1,998/2,018 against $1,985/2,005 late in New York on
Wednesday.
Palladium <XPD=> slipped to $423/431 from its Wednesday U.S.
close of $425/433.
Meanwhile, the chief financial officer of the U.S. No. 1
silver producer, Coeur D'Alene Mines Corp, forecast the price of
silver will range from $15 to $20 an ounce in the next two
years, and investment demand will remain a key driver.
[]
Silver <XAG=> rose to $17.14/17.20 from $16.81/16.87 an
ounce late on Wednesday in the U.S. market.
(Editing by Matthew Lewis)
