* Dollar firms on euro zone debts woes; ECB eyed
* SPDR gold ETF reports fresh 1.6-tonne outflow
* Palladium posts biggest losses of the precious metals
(Updates prices, adds BoE decision)
By Jan Harvey
LONDON, Feb 4 (Reuters) - Gold prices retreated towards
towards $1,100 an ounce in Europe on Thursday, as the dollar
rose to a seven-month high versus the euro on concerns over debt
problems in euro zone economies Greece, Spain and Portugal.
Traders are awaiting the outcome of the European Central
Bank's policy meeting later in the session for clues as to the
next direction of the foreign exchange markets, and consequently
gold, analysts said. []
Spot gold <XAU=> was bid at $1,102.40 an ounce at 1214 GMT,
against $1,108.85 late in New York on Wednesday. U.S. gold
futures for February delivery <GCG0> on the COMEX division of
the New York Mercantile Exchange fell $8.80 to $1,102.60.
The prospect of further gains in the dollar, which would cut
gold's appeal as an alternative asset and make dollar-priced
commodities more expensive for holders of other currencies, is
seen as a risk for precious metals this year.
"We are looking at the likelihood of dollar strength this
year, primarily based on Fed (monetary policy) tightening," said
Deutsche Bank's head of research Michael Lewis.
"On the forex side we have a target of 1.35 on the
euro/dollar, and that is the reason we are slightly bearish on
precious metals," he added. "We are not imagining a significant
correction, but this is a dollar story."
The ECB is expected to keep interest rates at a record low
1.0 percent when its decision is announced at 1245 GMT, and to
wait until March before looking at further unwinding crisis
support measures. []
"The European Central Bank will likely keep interest rates
unchanged... but the bank's future policy stance will also be a
market focus," said Pradeep Unni, senior analyst at Richcomm
Global Services, in a note.
The Bank of England announced no increase to its 200
billion pound ($317.5 billion) asset-buying programme after its
monetary policy meeting, halting the scheme after 11 months, and
left UK interest rates at a record low of 0.5 percent.
[]
OIL, EQUITIES DECLINE
Among other commodities, oil prices fell towards $76 a
barrel as rising crude inventories in the United States weighed,
while base metals were pressured by the firmer dollar. Gold is
sometimes bought as a hedge against oil-led inflation. []
On the wider markets, European shares slipped ahead of the
euro zone rates decision, reflecting earlier losses in Asia.
U.S. stock futures pointed to a lower open. [] []
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD> reported its first outflow this
month on Wednesday. Its holdings declined 1.6 tonnes that day,
after falling 21.7 tonnes in January. []
Wholesale gold buying in India, historically the world's
biggest gold consumer, remained dull on Thursday afternoon as
traders awaited a further fall in prices. []
Elsewhere silver <XAG=> was at $16.12 an ounce against
$16.34, platinum <XPT=> was at $1,550.50 an ounce versus
$1,572.50, and palladium <XPD=> at $429 versus $434.50.
Palladium was the best-performing precious metal last year
as rising investment and hopes for a recovery in buying by the
car industry -- which accounts for more than 50 percent of
global demand for the metal -- lifted prices.
"We continue to be of the opinion that large dips towards
the $400 an ounce mark present good opportunities for industrial
end-users to cover their future requirements," said precious
metals house Heraeus in a weekly report.
(Editing by Sue Thomas)
