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By Jan Harvey and Pratima Desai
LONDON, June 12 (Reuters) - Gold tumbled by more than two
percent on Thursday to its lowest level since early May as the
dollar extended gains against the euro after the release of
above consensus data from the United States.
Spot gold <XAU=> fell to $856.80 an ounce, the lowest since
May 2, as the dollar rose after data showed U.S. retail sales
jumped by one percent in May. []
The news reinforced growing perceptions that U.S. interest
rates may have bottomed and that the next move by the U.S.
Federal Reserve would be a hike, possibly later this year.
Gold <XAU=> was down at $861.10/862.25 an ounce at 1314 GMT
from $881.15/882.55 late in New York on Wednesday.
U.S. gold futures <GCQ8> also fell to a 1-1/2 month low of
$859.60 an ounce and were last down $18.9 at $864 an ounce.
"The shape of the trendline for gold prices is currently
very dependent on the US dollar, although the amplitudes of the
swings are relatively low," said Eugen Weinberg, commodities
analyst at Commerzbank.
Anti-inflation rhetoric by a Fed official also helped the
dollar earlier on Thursday. []
Gold has see-sawed this week in line with the dollar and
crude oil prices.
"We are seeing gold tracking forex ... There is so much
uncertainty regarding inflation and where crude oil is going,"
said Standard Bank analyst Walter de Wet.
FLOOR
Falling crude <CLc1> prices are pressuring gold, which is
often bought as a hedge against oil-led inflation.[]
But with prices still firm over $130 a barrel and within
reach of the all-time high they set last week, "crude oil
definitely provides a floor in gold prices", said de Wet.
Forex, however, remains the main driver. The dollar has
taken a firmer tone this week after a raft of comments from U.S.
officials expressing concern over the currency's weakness.
U.S. Federal Reserve Chairman Ben Bernanke's increased
emphasis on rising inflation has been interpreted as a sign that
an interest rate hike may be on the cards later this year.
However, with expectations for a euro zone rate hike also
rising, currency markets have been volatile this week, leading
to similar fluctuations in gold.
The precious metal benefits from a weaker dollar as it is
seen as an alternative investment, while a softer U.S. currency
also makes dollar-priced metals such as gold cheaper for holders
of other currencies.
"Given the likelihood of further rate speculation/economic
data reaction, gold could see further slippage," said
TheBullionDesk.com analyst James Moore.
Platinum <XPT=> tracked gold lower to $1,993/2,013 against
2,032.50/2,052.50 on Wednesday.
The white metal has largely moved in tandem with gold as the
dollar has fluctuated, but is also benefitting from fears over
supply from major producer South Africa.
Platinum therefore "looks likely to outperform gold as
dollar strengthens", Fairfax IS analyst John Meyer said.
The republic, which produces around 80 percent of global
platinum supply, is suffering from a power shortage that is
expected to cut metals output.
Palladium <XPD=> was softer at $423/431 an ounce against
424.00/432.00 an ounce, while silver <XAG=> slipped to
$16.37/16.45 from $16.88/16.95.
(Reporting by Pratima Desai; editing by Nigel Hunt)
