* Gold's inflation hedge appeal dented as oil below $44
* ECB cuts rates by 75 bps, BoE by 1 percentage point
* ZKB platinum ETF holdings rise 27 percent
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK dateline)
NEW YORK/LONDON, Dec 4 (Reuters) - Gold prices ended lower
Thursday on a steep crude oil decline despite a weaker dollar
against the euro, and worries about deflation could put a
damper on gold's rise.
Gold's appeal as a hedge against inflation decreased as
broad-based commodity index Reuters/Jefferies CRB <.CRB>
dropped to a six-year low, led by a 6 percent drop in crude oil
futures.
"I think that the whiff of deflation that's in the air is
enough to keep the near-term pressure on gold," said James
Steel, chief commodity analyst as HSBC.
Spot gold <XAU=> was at $767.50 at 2 p.m. EST (1900 GMT),
down 0.7 percent from Wednesday's close of $772.60.
U.S. gold futures for February delivery <GCG9> settled down
$5.00 at $765.50 an ounce on the COMEX division of the New York
Mercantile Exchange.
The precious metal fell earlier in line with the softer
euro after the European Central Bank cut interest rates by a
larger-than-expected three-quarters of a percentage point.
However, a turnaround in the single currency later in the
session encouraged buying of gold as a hedge against dollar
weakness. []
"Gold is mirroring the directions in euro-dollar after the
ECB rate cuts," said Pradeep Unni, a senior analyst at Richcomm
Global Services.
"The dollar also seems to be discounting the gains ahead of
the (U.S.) non-farm payrolls data scheduled tomorrow," he
added.
The ECB cut its benchmark rate to 2.50 percent, its lowest
level in nearly 2-1/2 years, as inflation plummeted and the
euro zone economy sank deeper into recession. []
This followed a full percentage point cut to 2 percent by
the Bank of England. []
In the slightly longer term, rate cuts are likely to
benefit gold, if they increase liquidity, analysts said.
"The recent sharp dip in inflation pushed up real interest
rates, exerting pressure on gold," Commerzbank said in a note.
"Generous rate cuts are, therefore, good for gold as they again
reduce the opportunity costs involved in holding it."
Traders turned their attention to U.S. non-farm payrolls
data due on Friday for clues as to the next direction of the
currency markets, and of gold.
Physical demand eased in some of gold's traditional markets
as traders awaited price falls. Indian buyers looked for prices
of around $740 an ounce before making purchases, dealers
reported. []
PLATINUM STEADIES
Platinum prices were steady, but held only a touch over
those of gold, as traders worried about the impact of the
recession on carmakers, who account for around half of all
demand for the white metal.
"The platinum market appears to be just plain quiet until
we get a clear view of the U.S. auto bailout package," Steel
said.
The chief executives of the major U.S. auto companies
pledged to refocus on higher fuel efficiency and lower
production costs as they asked Congress again on Thursday for
billions of dollars in emergency cash. []
Spot platinum <XPT=> was at $784.50 an ounce, down 1.1
percent from its previous finish of $793.50. Its sister metal,
palladium <XPD=>, was at $167.50, 2.1 percent lower than
Wednesday's late quote of $171.
Zurich Cantonal Bank said holdings of its platinum-backed
exchange-traded fund <ZPLA.S> rose 27 percent to 105,200 ounces
on Dec. 1, from 83,000 ounces in September. Its
palladium-backed ETF had inflows of 12 percent in the same
period. []
Among other precious metals, spot silver <XAG=> closed at
$9.54, 0.9 percent lower than its Wednesday's close of $9.63.
(Reporting by Frank Tang; Editing by Walter Bagley)
