* ECB holds rates, BoE expands quantitative easing
* Profit taking in platinum group metals
(Updates prices)
By Jan Harvey
LONDON, Aug 6 (Reuters) - Gold rose 1 percent in Europe on
Thursday as an expansion to the UK's quantitative easing
programme and the European Central Bank's decision to keep
interest rates at record lows stoked fears inflation may rise.
Spot gold <XAU=> was bid at $970.30 an ounce at 1238 GMT,
against $961.95 an ounce late in New York on Wednesday. U.S.
gold futures for December delivery <GCZ9> on the COMEX division
of the New York Mercantile Exchange fell $6.30 to $972.60.
The ECB had been widely expected to leave rates unchanged at
1 percent, but news that the Bank of England was to expand its
quantitative easing programme to 175 billion pounds ($297
billion) from 125 billion surprised traders.
"The ECB and BoE actions suggest that central banks have
still got the pedal to the metal, and people are starting to get
worried about the banks having things too loose for too long,"
said Citigroup analyst David Thurtell.
Gold, which is often seen as a key hedge against inflation,
rose despite a climb in the dollar versus the euro in the wake
of the news -- a currency move that would normally pressure
bullion prices. []
Traders are now awaiting further direction from ECB chief
Jean-Claude Trichet's remarks after the decision.
On the wider markets, European shares rose after the ECB
announcement, while U.S. stock futures extended gains after
jobless claims data. [] []
U.S. crude prices steadied after earlier losses. Gold, which
is sometimes seen as a hedge against oil-led inflation, often
tracks the crude market. []
OUTPUT RISES
In supply news, Gold Fields <GFIJ.L>, the world's number
four gold producer, said its output of the metal rose 4 percent
in the fourth quarter while production costs fell 6 percent to
$512 an ounce. []
On the demand side, buying of gold to back exchange-traded
funds remains slack, with holdings of the SPDR Gold Trust <GLD>,
the largest bullion ETF, unchanged for a fifth day on Wednesday.
Sales in the world's main gold jewellery market, India, were
also lacklustre as banks were shut by a strike. []
Among other precious metals, silver <XAG=> was little
changed at $14.98 an ounce against $14.64.
The world's largest silver producer, Fresnillo <FRES.L>,
said its board had approved a pre-feasibility study for the
development of its Saucito project in Mexico, which could
produce up to 9 million ounces of silver a year.
This is equivalent to more than 1.3 percent of annual global
production, which stood at 680.9 million ounces last year.
Platinum <XPT=> was at $1,279 an ounce against $1,282.50,
while palladium <XPD=> was at $275 against $273.
Traders have taken profits in both metals after they hit
multi-month highs on Wednesday amid talk of a strike at South
African power company Eskom.
"Profit taking has been seen this morning (in palladium) and
traders will be looking to see if platinum can break higher,
potentially giving the metal fresh upside momentum," said James
Moore, an analyst at TheBullionDesk.com.
"We still remain concerned about the level of speculative
longs in the market," he added. "However the metal is on course
to target the $300-308 level."
(Editing by Sue Thomas, editing by Anthony Barker)
