(recasts, adds quotes, changes prices, pvs SINGAPORE)
By Atul Prakash
LONDON, April 23 (Reuters) - Gold drifted lower on Wednesday
tracking as the dollar firmed against the euro, with investors
staying on the sidelines as the metal struggled to retain recent
gains, analysts said.
Spot gold <XAU=> fell as low as $913.80 an ounce and was
quoted at $916.10/917.10 at 1021 GMT, against $920.65/922.05
late in New York on Tuesday.
"The metal is under pressure as its failed to respond to
higher oil prices and a weaker dollar," said Simon Weeks,
managing director of precious metals at Bank of Nova Scotia.
"Gold is vulnerable to another major sell-off in the near
term, with a drop of about 18 tonnes in ETF inventories on a day
hardly being a good advertisement for the upside."
Gold held in New York-listed StreetTRACKS Gold Shares
<GLD.N> <XAUEXT-NYS-TT>, the world's largest gold-backed
exchange-traded fund, fell to 623.41 tonnes on Tuesday from
641.82 tonnes the previous day.
The metal hit a three-week high of $952.60 last week but
attempts to stay above $950 were met by profit-taking. Dealers
noted some physical demand but it was not enough to trigger
another rally towards last month's record high of $1,030.80.
"In the near term, gold is likely to continue to take its
lead from dollar movements," said Suki Cooper, precious metals
analyst at Barclays Capital.
The euro retreated from a record high set the previous
session versus the dollar after a European Central Bank
policymaker toned down earlier hawkish comments on interest
rates. []
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
RANGE-BOUND TRADE
Oil eased under $118 a barrel, but stayed on the boil due to
supply disruptions in Nigeria and fears that a refinery strike
in Scotland could hit production in the North Sea.
"Higher oil prices should increase near-term inflation
expectations, which might leave some room for near-term upside
potential for commodities," analysts at Standard Bank said.
"However, continued fund liquidation signals that most
investors remain on the sidelines because of uncertainty in
financial markets. Precious metals should remain range-bound
ahead of the Fed interest rate decision due next week."
The U.S. Federal Reserve is expected to lower interest rates
from the current 2.25 percent.
A rate cut tends to lower the dollar's appeal, which in turn
often lifts bullion demand.
Platinum traded in a range of $37 an ounce, falling as low
as $2,001 an ounce and hitting an intra-day high of $2,038. It
<XPT=> was last quoted at $2,012/2,022, against
$2,017.50/2,027.50.
In industry news, Lonmin Plc <LMI.L>, the world's third
biggest platinum producer, posted an 8.3 percent rise in second
quarter platinum sales, but again cut its full-year sales target
following power problems in South Africa. []
South Africa's power crisis could cut production from Anglo
American's <AAL.L> platinum operations by 150,000 ounces in
2008, Chief Executive Officer Cynthia Carroll said.
The electricity supply crisis forced gold and platinum mines
to shut down for five days in January. Since then mines have
been operating below full power.
Platinum also faced pressure from news that Mitsui Mining
and Smelting <5706.T> had developed a new catalyst for diesel
engine cars that replaces the use of platinum with silver, a
less conventional but much cheaper metal. []
Silver <XAG=> edged down to $17.61/17.71 an ounce from
$17.64/17.73, while palladium <XPD=> was up 50 cents at
$451.50/457.50 an ounce.
(Reporting by Atul Prakash; editing by Peter Blackburn)
