(Recasts, updates prices, adds comment, pvs SINGAPORE)
By Jan Harvey
LONDON, June 4 (Reuters) - Gold slipped in European trade on
Wednesday as the dollar stood firm, curbing buying of the
precious metal as an alternative investment, and as oil fell to
its lowest level since mid-May.
Spot gold <XAU=> dropped to $879.30/880.10 an ounce at 1002
GMT from $882.90/884.10 late in New York on Tuesday, when it
fell almost 1 percent.
The dollar rallied Tuesday after Federal Reserve Chairman
Ben Bernanke warned that the weaker dollar presented an
inflationary threat, and indicated that the Fed is unlikely to
cut interest rates further.
Bernanke's comments could represent a turning point for the
dollar, potentially pressuring gold further, Merrill Lynch
metals strategist Daniel Hynes said.
"(Bernanke) coming out with strong support gives the
impression there will be a strong rally in the dollar," he said.
Traders will be watching the foreign exchange markets to see
which currencies the dollar is primarily rallying against, he
said. "We have seen strength in some of the Asian currencies
against the dollar as a strong indication of support for gold,"
added Hynes.
Traders are also eyeing oil inventory data due out at 1430
GMT on Wednesday from the U.S. Department of Energy, which are
expected to show crude stockpiles rose last week. This could
further undermine oil prices and put more pressure on gold.
"The weekly DoE inventory report could move crude oil and
thus also gold considerably today," said Peter Fertig, an
analyst at Dresdner Kleinwort in Frankfurt. "The market
consensus is looking for a build of inventories in all three
categories.
"However, as the actual figures differed considerably from
consensus forecasts, it is quite open whether crude oil is going
to fall on a stronger build or will rise on disappointing
figures," he added.
The precious metal usually moves in the same direction as
crude prices, as it is bought as a hedge against oil-led
inflation.
Platinum <XPT=> was at $1,982.50/2,002.50 an ounce, down
from $1,992.50/2,012.50 late in New York Tuesday.
While the metal has slipped in line with gold as a result of
the stronger dollar, analysts say they expect supply constraints
in South Africa, where a power shortage has crimped output of
the white metal, and firm demand to underpin platinum.
"Near-term industrial demand for the metal should remain
robust with U.S. April factory orders having risen 1.1 percent
against expectations for a 0.1 percent decline and Eurozone
(quarter on quarter) GDP growth remaining robust," said Standard
Bank analysts. "This should support near-term prices."
In industry news, South Africa's Aquarius Platinum <AQPJ.J>
said it has received regulatory approval to buy a 50 percent
share in Platinum Mine Resources, which produces some 20,000
ounces of PGMs a year <ID:nL04470895>.
Palladium <XPD=> slipped to $427/435 an ounce from $429/437
late in New York on Tuesday. Silver <XAG=> eased to $16.64/16.70
an ounce from $16.77/16.84.
(Editing by Peter Blackburn)
