* Gold falls 3.9 pct, low physical demand also weighs
* Euro likely to see further losses ahead of ECB meeting
(Updates prices, adds comments)
By Anna Stablum
LONDON, Jan 12 (Reuters) - Gold shed 3.9 percent on Monday
dragging the other precious metals lower as oil fell and the
euro extended losses against the dollar, while physical demand
was seen softening.
By 1652 GMT spot gold <XAU=> was trading at $823.85 an
ounce, down 3.5 percent from $853.60 in New York late on Friday.
Earlier it hit $820.10, the lowest since Dec. 12.
"Physical demand in the key demand centres continues to be
lethargic with limited purchases," analyst Pradeep Unni at
Richcomm Global Services said.
Gold could drop substantially in the next couple of months,
Unni said.
Traders said the firm dollar and soft oil price drove gold
lower, dragging down the precious metals complex.
Dollar-priced commodities tend to fall if the dollar
strengthens as it makes them more expensive for holders of other
currencies.
The euro <EUR=> fell to $1.3347 amid talk of an aggressive
cut in eurozone interest rates later this week, with speculation
rife the European Central Bank will cut its key lending rate by
50 basis points to 2 percent. The ECB meets on Thursday
[]
Although investor interest in gold was currently positive a
firmer dollar could weigh on gold prices in the near term, a
Barclays Capital report said.
"Our forex strategists forecast the dollar to strengthen
against the euro on a 1-month and 3-month basis," it said.
Oil <CLc1> fell below $38 a barrel on persistent worries
about falling demand following Friday's dismal U.S. payrolls
report, which showed 1.1 million jobs lost since November and
the highest unemployment rate since 1993. [].
In theory, a weaker oil price reduces gold's appeal as a
hedge against inflation.
"We expect crude oil to remain weak in the first quarter,"
Standard Bank said in a report. "Precious metals, especially
gold, should find little support from this front."
PAR HERE
DEMAND
Physical demand for gold was seen softening after holding
firm in the normally strong fourth quarter.
"It tends to tail out in the first quarter ... the market
over the next few weeks will probably focus on weaker demand,"
analyst Michael Widmer at BNP Paribas said.
Gold has bounced more than 20 percent since tumbling to a
13-month low around $680 in late October. Bullion struck a record
$1,030.80 last March.
On COMEX, speculative gold players boosted their net long
positions to 133,604 at Jan. 6, up from 125,961 net longs at
Dec. 30, Commodity Futures Trading Commission data showed.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said it held 787.60 tonnes of gold as of
Jan. 9, down 0.28 tonnes from a record 787.88 tonnes on Jan. 7.
[]
Holdings in the trust, which issues securities backed by
physical stocks of gold, began climbing again in December after
poor prospects for the global economy ignited demand for bullion
as a safe-haven asset. <XAUEXT-NYS-TT>
Platinum <XPT=> was trading at $965.50 an ounce after
hitting $944, down 4.9 percent from $992.50 in New York on
Friday. Palladium <XPD=> was lower at $183.50 after falling to
a low of $183, down 4.2 percent from $191 late in New York on
Friday.
Silver <XAG=> was at $10.95 after touching a low of $10.74,
down 4.5 percent from New York's $11.24.
New York gold futures <GCZ9> fell $32.8 an ounce to $829.
(Additional reporting by Pratima Desai in London and Lewa
Pardomuan in Singapore, editing by Sue Thomas)
