(Updates with New York closing prices, market activity)
By Tamora Vidaillet and Atul Prakash
LONDON, May 1 (Reuters) - Gold ended lower after hitting a
four-month low below $850 an ounce on Thursday, as a sharp rise
in the dollar lowered gold's appeal as an alternative
investment and triggered a sell-off in precious metals.
Silver and palladium hit three-month lows, while platinum
shed 3 percent to a one-month low below $1,850 an ounce.
Gold <XAU=> fell as low as $847.10 an ounce after initially
rising to a high of $881.30. It was last at $850.25/851.65 by
New York's last quote at 2:15 p.m. EDT (1815 GMT), against
$864.65/866.05 in New York late on Wednesday.
"I think $850 is enough for now, but longer-term I expect
to see (gold at) the 200-day moving average, currently at $822,
before the correction will be complete," Simon Weeks, managing
director of precious metals at Bank of Nova Scotia, said.
"Sentiment has been bearish for a while, but it's time to
take a breather around this level before moving lower again. We
see some physical and technical buying, but I think there will
be better bargains in the coming days."
Precious metals came under pressure mainly because the
dollar rose to five-week highs against the euro after a key
U.S. manufacturing index for April came in slightly better than
expected.
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. Falling oil prices
also hit gold, which is viwed as a hedge against oil-led
inflation.
U.S. crude oil futures <CLc1> ended down 94 cents at
$112.52 a barrel. Crude hit a session of $110.30 a barrel, then
rebounded on news of a supply disruption in Nigeria.
"There is a certain investor fatigue that has crept in the
market in the last few weeks and I think it is going to take a
bit of oomph to get it going again," said Stephen Briggs,
economist at SG Corporate and Investment Banking.
ETFS SUFFER
U.S. gold futures ended sharply lower, with the active
contract for June delivery <GCM8> settling down $14.20, or 1.6
percent, at $850.90 an ounce.
Dealers were concerned about a drop in bullion holdings in
StreetTRACKS Gold Shares <XAUEXT-NYS-TT>, the world's largest
gold exchange-traded fund, to 580.45 tonnes as of Wednesday,
down nearly 10 percent in the last 10 days.
"We have fallen through a couple of support levels," said
Tom Kendall, metals strategist at Mitsubishi Corporation.
"There is more downward potential. We have got quite a lot
of data out of the U.S. over the next two days and that will
determine where the dollar goes from here in the short term."
In industry news, Gold Fields <GFIJ.J> said it had
suspended some operations at its South Deep mine in South
Africa after an accident killed nine contract workers.
[]
Spot platinum <XPT=> fell below $1,850 an ounce before last
quoted at $1,860.50/1,880.50 an ounce, against $1,906/1,921
late on Wednesday in New York.
Silver <XAG=> fell to a low of $15.97 an ounce and was last
at $16.19/16.25, versus its previous finish of $16.60/16.65.
Spot palladium <XPD=> was at $406/414 an ounce after falling to
a low of $397, against $410.50/418.50 late on Wednesday in the
U.S. market.
(Additional reporting by Frank Tang in New York; Editing by
David Gregorio)
