* Dollar pares losses versus the euro, oil tumbles
* Signs of easing physical demand seen
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Nov 3 (Reuters) - Gold futures ended 1
percent higher on Monday, retreating from session peaks as the
dollar rose, oil fell and dealers worried about physical demand
for bullion.
"With the change in the dollar and as oil price dropped
off, people start to look at the deflationary pressure, and
whether or not the reflation in gold is taking hold," said Greg
Orrell porfolio manager of California-based OCM gold fund.
Spot gold <XAU=> edged up to $723.50 at 3:07 p.m. EST (2007
GMT) from Friday's close of $723.05. The session high was $738.15 an ounce.
U.S. gold futures for December delivery <GCZ8> settled up
$8.60, or 1.2 percent, at $726.80 an ounce on the COMEX
division of the New York Mercantile Exchange. The close was
well off the session high of $739.50.
Market players expected that gold would be supported by
inflation fears as central banks around the world pumped money
to fight a global recession.
"At some point, everything the Fed is doing is to put an
end to the deflationary expectation, which is positive for the
gold market," Orrell said.
The dollar extended gains against most major currencies,
rising about 1 percent against the euro, as investors sought
safety in the U.S. currency. []
"This is due to a combination of the usual daily gold
drivers -- crude oil and the euro-dollar exchange rate -- and
also the weakness of physical gold demand in India," said
Dresdner Kleinwort consultant Peter Fertig.
Physical demand for the metal remained muted as price
volatility spooked investors. Gold imports to India, the
world's biggest bullion market, fell 27 percent in October year
on year, the Bombay Bullion Association said. []
Gold imports to Turkey, a key Middle Eastern market, also
tumbled to just 1 tonne from 29.7 tonnes in September, as the
firmer dollar curbed buying. []
Oil fell as further indicators of falling demand linked to
a potential recession offset OPEC plans to reign in output.
U.S. crude <CLc1> settled down $3.90, or 5.75 percent, at
$63.91 a barrel.
Weaker crude prices pressure gold, often purchased as a
hedge against oil-led inflation.
Traders will keep an eye on interest rate decisions due
this week.
The European Central Bank is due to announce its decision
on euro zone interest rates -- expected to be a 50 basis point
cut -- on Thursday. The Bank of England and the Reserve Bank of
Australia also are expected to announce cuts this week.
U.S. PRESIDENTIAL ELECTION EYED
Commodity traders also will focus on the U.S. elections on
Tuesday.
"Our (forex) team believes that an Obama victory is likely
to be short-term U.S. dollar positive, as it would allow
Washington to respond more proactively on crisis management,"
said Barclays Capital in a research note.
"This suggests that as far as the impact from currency
markets is concerned, an Obama victory could lead to potential
short-term downside risks for gold," they added.
Meanwhile, soft car sales data from Europe pressured
platinum group metals.
The German car market fell at least 10 percent in October,
an industry body said, while French car sales in October slid
7.3 percent, a second group said. []
Spain's car sales in the same month tumbled 40 percent, the
Spanish car manufacturers' association said. []
Spot platinum <XPT=> edged down to $811.50 an ounce from
$813 an ounce late in New York on Friday, while spot palladium
<XPD=> was unchanged at $196.00.
Among other precious metals, spot silver <XAG=> at $9.72
which was down 0.9 percent from Friday's close of $9.81.
(Editing by David Gregorio)
