* Gold steadies on profit taking after 10-week high
* Prices supported by dollar weakness, uptick in oil
* Traders eye ECB rate decision, Trichet inflation outlook
(Recasts, updates throughout)
By Jan Harvey
LONDON, July 2 (Reuters) - Gold steadied on Wednesday, with
weakness in the dollar and strength in oil lifting bullion after
investors took profits early in the session.
Gold <XAU=> traded at $940.60/941.70 an ounce at 1330 GMT
against $938.40/939.40 late in New York. It rallied to a high of
$945.80 an ounce on Tuesday, its strongest since April 18.
The precious metal slipped this morning as the dollar
recovered from two-month lows against the euro, fuelling
profit-taking after Tuesday's 10-week high.
However the U.S. currency softened once more after a report
showed the U.S. private sector shed more jobs than expected in
June, lifting gold. []
The precious metal has bounced more than 7 percent since
falling to a one-week low at $873.50 an ounce last week, mainly
driven by rising oil prices.
Higher oil prices tend to benefit gold, as they stoke
concerns over inflation -- against which gold is bought as a
hedge -- as well as increasing the appeal of commodities as a
whole.
However, gold has failed to react decisively either to
rising oil prices or dollar weakness on Wednesday, although both
have limited further falls.
"Gold has come off its lows, but it us not really a big move
given where the euro is," said Mitsubishi analyst Tom Kendall.
Traders were turning their attention to an interest rate
decision by the European Central Bank on Thursday, and to ECB
president Jean-Claude Trichet's outlook for inflation after the
meeting, for clues as to the future direction of the euro.
Any upward move in the euro against the dollar is likely to
support gold, which is often bought as an alternative investment
to the U.S. currency and moves in the opposite direction to it.
The ECB is expected to raise rates a quarter-point to 4.25
pct in a bid to fight inflation. []
"The markets broadly expect a 0.25-basis-point rise from the
ECB, but the question is what emphasis Trichet will put on
inflation after the meeting, and how the markets interpret that
as regards future interest rate activity by the ECB," said
Kendall.
However, with the euro already very firm against the dollar,
Thursday's rate decision may already be priced in, leaving the
single currency -- and gold -- in danger of a correction.
Among other precious metals, silver <XAG=> climbed to
$18.23/18.29 an ounce from $18.08/18.13 late in New York on
Tuesday, when it rallied as high as $18.19, its loftiest level
since May 27.
Prices are taking support from strike action in Peru, the
world's biggest silver miner.
"The mining strike in Peru continues to impact silver
production and Buenaventura has confirmed that all production at
its Uchucchacua mine has been brought to a halt," said Barclays
Capital in a note.
"However, given the vast number of new silver projects due
to come online this year, we still expect silver production to
rise year-on-year," it said, adding that the mine produced 9.9
million ounces of silver in 2007.
Spot platinum <XPT=> was steady at $2,067.50/2,087.50 an
ounce from $2,069.00/2,089.00 late in New York.
Spot palladium <XPD=> was little changed at $462.50/470.50
an ounce from $464.00/472.00 an ounce.
(Reporting by Jan Harvey; editing by Christopher Johnson)
