* ECB comments stoke speculation over euro zone rate hikes
* Safe-haven bids diminish on Venezuelan peace proposal
* Coming up: U.S. nonfarm payrolls on Friday
(Recasts, adds comments, updates prices, adds second
byline/dateline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, March 3 (Reuters) - Gold fell nearly 1.5
percent on Thursday, snapping a four-day winning streak as
indications the European Central Bank may raise interest rates
to battle inflation dented bullion's investment appeal.
ECB President Jean-Claude Trichet said the central bank
would exercise "strong vigilance" over inflation and interest
rate increases could come at ECB's next meeting in April, far
earlier than markets expected. []
"Obviously, you have the European talk about higher
interest rates down the road and a stalling crude rally, which
are weighing on the market now," said Frank McGhee, head
precious metals trader of Integrated Brokerage Services LLC.
Gold was also dragged down by diminishing safe-haven demand
and sharply lower oil prices as Venezuela said its proposal for
a negotiated solution to the Libyan conflict was accepted by
the North African government and the Arab League said the plan
was being considered. []
"You have everything that at least set us up for a day of
profit taking," McGhee said.
Spot gold <XAU=> fell as low as $1,411.52 an ounce and was
down 1.4 percent to $1,413.85 an ounce at 12:23 p.m. EST (1723
GMT). The metal fixed at $1,421.50 in London.
U.S. gold futures for April delivery <GCJ1> fell $22.50 an
ounce to $1,415.20.
The metal retreated from the previous session's record
highs as investors seized a chance to take profits after the
Arab League said a Venezuelan proposal to end the conflict in
Libya was under consideration. But prices still found residual
support from unrest in the region.
Trichet's remarks on inflation and a possible rate hike
pushed the euro <EUR=> sharply higher, above the
psychologically important $1.40 level. []
"This is the type of language that in previous rate hike
cycles preceded a rate hike," said currency strategists at
Action Economics. []
Widespread low interest rates, which have knocked the
appeal of other assets such as cash on deposit, have burnished
gold's appeal in recent years and helped drive prices to record
highs. []
VTB Capital analyst Andrey Kryuchenkov said that while a
number of factors were still supporting gold, including
violence in Libya, any suggestion that interest rates were set
to rise was likely to put pressure on the metal.
"Due to civil unrest in the Middle East/North Africa
region, the downside is still limited," he said. "Yet (the ECB
comment) is still important, as it gives you a sense of things
to come. Rates will have to rise, and currency yields (will be)
up," he said.
LIBYA SIMMERS
An earlier retreat in risk aversion had already weighed on
gold, pulling prices back from the record $1,440.10 an ounce
they hit on Wednesday.
Spot gold has risen by 10 percent in the six weeks since
unrest in Tunisia and Egypt spilled into Libya, Yemen, Bahrain
and, most recently, Oman and Iran.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For an interactive graphic on the unrest, click:
http://r.reuters.com/nym77r
For more stories on gold's rally: []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Thursday's correction notwithstanding, the situation is
still likely to underpin gold prices as analysts are sceptical
over the latest news.
"I doubt a Chavez-brokered deal would have much impact from
a political perspective as he has little legitimacy in the
international political sphere," said Cedric Chehab, head of
commodities analysis at Business Monitor, a research group.
Silver <XAG=> fell 1.6 percent to $34.13 an ounce after
rising to a 31-year high of $34.96 on Wednesday.
Platinum <XPT=> eased 0.6 percent to $1,834.99 an ounce,
while palladium <XPD=> lost 0.4 percent at $813.50.
Prices at 12:23 p.m. EST (1723 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCJ1> 1414.00 -23.70 -1.7% -0.5%
US silver <SIK1> 34.160 -0.675 -2.0% 10.4%
US platinum <PLJ1> 1840.00 -19.30 -1.0% 3.5%
US palladium <PAM1> 817.00 -5.65 -0.7% 1.7%
Gold <XAU=> 1413.85 -20.64 -1.4% -0.4%
Silver <XAG=> 34.13 -0.54 -1.6% 10.6%
Platinum <XPT=> 1834.99 -10.75 -0.6% 3.8%
Palladium <XPD=> 813.50 -3.22 -0.4% 1.8%
Gold Fix <XAUFIX=> 1421.50 -9.00 -0.6% 0.8%
Silver Fix <XAGFIX=> 34.53 -22.00 -0.6% 12.7%
Platinum Fix <XPTFIX=> 1841.00 5.00 0.3% 6.4%
Palladium Fix <XPDFIX=> 817.00 6.00 0.7% 3.3%
(Additional reporting by Jan Harvey in London; editing by Jim
Marshall)
