* ECB comments stoke speculation over euro zone rate hikes
* Safe-haven bids diminish on Venezuelan peace proposal
* US gold volume above 200,000 lots first time since Jan.
* Coming up: U.S. nonfarm payrolls on Friday
(Recasts, adds graphic, details, updates prices, changes
dateline, previously NEW YORK/LONDON)
By Frank Tang
NEW YORK, March 3 (Reuters) - Gold fell 1.5 percent on
Thursday, snapping a four-day rally to record highs on news of
a Venezuelan proposal to end turmoil in Libya and as the
European Central Bank warned it could soon raise interest
rates.
Gold nearly halved its gains from the past four days which
culminated in an all-time high $1,440.10 an ounce on Wednesday.
Bullion investors took profits as oil prices slipped after
Venezuela said Muammar Gaddafi had agreed to its proposal for
an international commission to negotiate a peace plan in Libya,
the world's 12th largest oil exporting nation. []
Bullion was also pressured by ECB President Jean-Claude
Trichet's statement that the central bank would exercise
"strong vigilance" over inflation and that 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.
"You have everything that at least set us up for a day of
profit taking," McGhee said.
Spot gold <XAU=> fell as low as $1,409.96 an ounce and was
down 1.5 percent to $1,412.90 an ounce at 3:04 p.m. EST (2004
GMT). The metal fixed at $1,421.50 in London.
U.S. gold futures for April delivery <GCJ1> settled down
$21.30 an ounce at $1,416.40, with turnover of more than
200,000 lots, some 10 percent higher than its 30-day average,
preliminary Reuters data showed.
Thursday marked the first time U.S. gold volume rose above
200,000 contracts since Jan. 28.
Trichet's remarks on inflation and a possible rate hike
pushed the euro <EUR=> sharply higher against the dollar,
edging toward 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. []
On charts, gold has recently risen in a narrow channel,
which indicates uniformity of its recent rally, said Rick
Bensignor, chief market strategist of Dahlman Rose.
(Graphic: http://link.reuters.com/dub48r)
Bensignor said gold should find key support between $1,370
and $1,380 an ounce should prices correct further.
"Unless you think the dollar is going to bottom and do a
massive turnaround, it's hard to think why gold is going to
stop here," Bensignor said.
U.S. stocks shot up on lower oil prices and upbeat U.S.
labor market data, which added pressure to gold.
Data showing new U.S. claims for unemployment benefits fell
last week to their lowest level in more than 2-1/2 years was
the latest optimistic reading to bolster hopes for an upside
surprise in Friday's key payrolls report. []
LIBYA SIMMERS
Gold has risen 10 percent since late January, when unrest
was first reported in Tunisia. It later spilled into Egypt,
Libya, Yemen, Bahrain and, most recently, Oman and Iran.
Muammar Gaddafi struck at rebels controlling a key Libyan
coastal road for a second day on Thursday, but received a
warning he would be held to account at The Hague for suspected
crimes by his security forces. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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 skeptical
of the latest news.
"I doubt a (Venezuela President Hugo) 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 1.3 percent to $34.22 an ounce after
rising to a 31-year high of $34.96 on Wednesday.
Platinum <XPT=> slipped 1.2 percent to $1,823.99 an ounce,
while palladium <XPD=> lost 0.8 percent at $810.22.
Prices at 3:03 p.m. EST (2003 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1416.40 -21.30 -1.5% -0.4%
US silver <SIK1> 34.327 -0.508 0.0% 11.0%
US platinum <PLJ1> 1833.00 -26.30 -1.4% 3.1%
US palladium <PAM1> 814.80 -7.85 -1.0% 1.4%
Gold <XAU=> 1412.95 -21.54 -1.5% -0.5%
Silver <XAG=> 34.21 -0.46 -1.3% 10.9%
Platinum <XPT=> 1823.99 -21.75 -1.2% 3.2%
Palladium <XPD=> 810.22 -6.50 -0.8% 1.3%
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 Amanda Cooper and Jan Harvey in
London; editing by Jim Marshall)
