* Dollar rises to 3-week high vs euro on stimulus hopes
* Oil prices fail to hold gains above $48 a barrel
* Abu Dhabi Dec gold sales fall 40 pct month on month
(Updates, adds comment)
By Jan Harvey
LONDON, Jan 5 (Reuters) - Gold slid more than 3 percent in
Europe on Monday as the strengthening dollar knocked the metal's
appeal as a currency hedge, and oil prices retreated from highs.
Other precious metals tumbled in gold's wake, with silver
falling 8 percent, platinum 3 percent and palladium 6 percent.
Spot gold <XAU=> was quoted at $851.65/853.65 an ounce at
1445 GMT, down from $873.20 an ounce late in New York on Friday,
having touched a session low of $843.50.
U.S. gold futures for February delivery <GCG9> on the COMEX
division of the New York Mercantile Exchange were down $26.60 at
$852.90 an ounce, having earlier touched a low of $843.50.
"The dollar is the critical factor today," said BNP Paribas
analyst Michael Widmer.
The U.S. currency extended gains against the euro to a fresh
three-week high on Monday on hopes U.S. President-elect Barack
Obama will unveil fresh measures to boost the economy.
[]
Obama is due to meet House Speaker Nancy Pelosi and Senate
Majority Leader Harry Reid later in the session to discuss their
legislative agendas. []
Obama officials have been discussing an economic stimulus
bill in the range of $675 billion to $775 billion.
The euro has also been battered by poor Italian and Spanish
inflation data and tax cuts in Germany, which are expected to
add pressure on the European Central Bank to cut interest rates
soon.
"Gold's move in the last couple of days is almost entirely
due to the strength of the dollar," said UBS commodity
strategist John Reade. "The number one, front centre driver of
the dollar gold price is where euro-dollar is going."
The euro-dollar exchange rate "moved sharply higher in
December and has come off in the first couple of trading days of
this year," he added. "It has dragged gold with it."
The precious metal had found good support in early trade as
oil prices rose nearly 3 percent after an Iranian military
commander called for an oil boycott over Israel's offensive in
the Gaza Strip. []
However, it has slipped as oil gave up those gains.
Gold usually moves in line with oil prices, both because
firmer crude boosts interest in the precious metal as a hedge
against oil-led inflation and increases the appeal of
commodities as an asset class.
JEWELLERY BUYING SOFT
Demand for gold jewllery has been hit by the higher prices.
Sales in Abu Dhabi fell 40 percent in December from a month
before, the emirate's industry group said. []
Gold buying in India, the world's largest market for the
precious metal, has been crimped by higher prices, traders said.
"People would want to buy if prices fall below 12,500
rupees," said Mayank Khemka, managing director of Delhi-based
Khemka International. Prices are currently around 13,500 rupees.
Among other precious metals, silver slipped in line with
gold to a low of $10.54, before recovering to $10.86/10.94 an
ounce from $11.52 late on Friday.
Platinum and palladium also fell, with both metals suffering
from expectations demand from carmakers will continue to fall.
France and Japan posted steep falls in December car sales on
Monday, while U.S. auto sales numbers are due later in the
session. []
Automakers are responsible for around 50 percent of global
platinum and palladium demand.
Platinum <XPT=> eased to $925.50/935.50 an ounce from $944,
while palladium <XPD=> dipped to $182/187 an ounce from $190.
(Reporting by Jan Harvey; Additional reporting by Julie Crust;
Editing by David Evans)
