* Dollar tanks as Fed cuts interest rates to 0-0.25 pct
* Oil traders eye OPEC production decision
* SPDR Gold Trust bullion holdings rise again
(Recasts, adds detail, changes dateline, pvs SYDNEY)
By Jan Harvey
LONDON, Dec 17 (Reuters) - Gold edged down in Europe on
Wednesday as traders took profits after the previous session's 2
percent gains on the back of a larger-than-expected interest
rate cut from the U.S. Federal Reserve.
The market is awaiting fresh direction from the crude oil
market, which rose ahead of an expected production cut from the
Organization of the Petroleum Exporting Countries (OPEC).
Spot gold <XAU=> was quoted at $855.60/857.60 an ounce at
1024 GMT, little changed from $857.35 an ounce late in New York
on Tuesday. U.S. gold futures for February delivery <GCG9> were
up $14.70 at $857.40.
Gold is likely to consolidate after recent sharp moves,
analysts said.
"We have jumped so much in a relatively short period of time
without any major changes on the fundamental side," said
Wolfgang Wrzesniok-Rossbach, the head of sales at Heraeus.
While gold was benefiting from dollar weakness and
safe-haven buying as a result of the financial crisis, physical
demand for bullion was tailing off as prices rose,
Wrzesniok-Rossbach said.
"Fundamentally the situation might not be 100 percent
positive, but everything related to the financial crisis is
positive for gold."
Gold climbed in late New York trade on Tuesday after the Fed
said it was cutting rates to between zero and 0.25 percent,
knocking the dollar lower and prompting further rate cuts from
Hong Kong and Kuwait. []
The dollar hit a 2-1/2 month low against the euro on
Wednesday after the cut. []
However, "technical momentum signals are warning of an
upside correction for the greenback today," said Standard Bank
analyst Walter de Wet. "This could restrain precious metals."
The other main external driver of gold, crude oil prices,
were broadly supportive, ticking up $1 a barrel ahead of an OPEC
decision on production quotas. []
The cartel is expected to cut output by some 2 million
barrels to shore up the falling oil price, which has dropped
around $100 a barrel from the highs it hit earlier this year.
DEMAND MIXED
Physical demand for gold was mixed, with traders reporting
falling interest in gold coins and bars in Europe and Indian
buyers said to be staying away until prices fall.
However, investment demand for gold-backed exchange-traded
funds was firm. The world's largest bullion-backed ETF, the SPDR
Gold Trust <GLD>, said its gold holdings rose 3.98 tonnes on
Dec. 16 and are up 1 percent or 7 tonnes since Friday.
[]
Among other precious metals, platinum and palladium were
little changed. The two metals, which are primarily used to make
catalytic converters, have fallen sharply in recent months on
fears demand would suffer from a slowdown in car sales.
Platinum is now trading close to parity with gold, a
situation last seen in 1996. However, the metal is likely to
recover next year, analysts said.
"Current price levels for platinum group metals are not
sustainable for many South African producers unless there is a
sharp weakening of the rand," said Fairfax analyst Marc Elliott.
"Consequently the eventual recovery of the automotive market
appears likely to prompt a shortage that should lift PGM prices
perhaps to levels seen earlier this year."
"However, for the next few months we see little reason for a
substantial improvement, unless some major production cuts (or)
disruptions take place," he added.
Spot platinum <XPT=> was quoted at $856/866 an ounce against
$860.50 late in New York on Tuesday, while palladium <XPD=> was
at $176.50/181.50 an ounce against $178.
Silver <XAG=> fell to $10.98/11.06 an ounce from $11.21.
(Reporting by Jan Harvey; Editing by Karen Foster)
