* Gold falls 4 pct, low physical demand also weighs
* Economic weakness hurts jewelry buying, pressures prices
* Euro likely to see further losses ahead of ECB meeting
(Recasts, updates with quotes, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Anna Stablum
NEW YORK/LONDON, Jan 12 (Reuters) - Gold dropped 4 percent
to a one-month low 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.
"It has been currency related. From a technical standpoint,
the market really hasn't broken any major hurdles," said Rob
Kurzatkowski at optionsXpress in Chicago.
Kurzatkowski said that the gold market was overbought
earlier in January, and many risk-averse traders preferred to
buy fixed-income products instead of the metal.
Spot gold <XAU=> was at $818.70 an ounce at 2:26 p.m. EST
(1926 GMT), down 4.1 percent compared with $853.60, the last
trade on Friday. Earlier it hit $814.65, which marked the
lowest price since Dec. 12.
U.S. gold futures for February delivery <GCG9> settled down
$34, or 4 percent, at $821.00 an ounce on the COMEX division of
the New York Mercantile Exchange.
Traders said that ongoing economic weakness could hurt gold
jewelry demand, which represents more than 60 percent of total
gold buying.
"A lot of people are thinking we are going into a deep
recession. So who needs gold? And they don't think that we will
have hyperinflation," said Jonathan Jossen, a COMEX gold
options floor trader.
Pradeep Unni, analyst at Richcomm Global Services, also
said that physical demand in key centers continued to be
lethargic with limited purchases.
Gold could drop substantially in the next couple of months,
Unni said.
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 below $1.33 amid talk of an aggressive
cut in euro zone 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 []
Oil <CLc1> [] fell over $3 to 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.
DEMAND
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.
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 at $954.50 an ounce, down 3.8 percent
from its last finish $992.50 in New York on Friday. Palladium
<XPD=> was at $184.00 an ounce, 3.7 percent lower than $191,
its previous close on Friday.
Silver <XAG=> was quoted at $10.69 an ounce, down 4.9
percent from its previous session close of $11.24.
(Additional reporting by Chris Kelly in New York, Pratima
Desai in London and Lewa Pardomuan in Singapore; Editing by
Christian Wiessner)
