(Updates prices, adds details)
LONDON (Thomson Financial) - Gold extended Friday's sharp losses as the dollar clocked up further gains against the euro, diminishing the appeal of the precious metal as an alternative invesetment.
In addition, the metal was under pressure from low liquidity, year-end book squaring and Friday's weak close on Wall Street, which sent Asian and European stock markets lower today.
At 10.15 am, spot gold was trading at 786.03 usd per ounce, down from 793.55 usd in late New York trade Friday, when the metal lost more than 4 usd.
'Interest rate differentials and the dollar's movements are again likely to be key to gold's price direction in the week ahead, and in addition liquidity may start to become an issue,' TheBullionDesk.com analyst James Moore said.
The dollar rallied against the euro on Friday -- sending gold sharply lower -- after higher-than-expected US inflation data reduced market expectations of further rate cuts by the US Federal Reserve.
While Moore now sees gold closing the year around 785 usd rather than above 800 usd, he remains upbeat over the longer term as there remains a lot of interest in gold.
Gold prices hit a 28 year high of 845 usd per ounce on Nov 7 when the dollar fell to record lows against the major currencies and oil prices rose to all-time record levels.
But the metal has since lost nearly 6 pct of its value since that date as the dollar rebounds, oil prices trend off record highs and players square positions ahead of the end of the year.
Analysts at Commonwealth Bank of Australia said while dollar strength is pressuring gold at present, inflation concerns, as indicated by Friday's strong US CPI number, should underpin the metal.
Gold is often bought as a hedge against rising prices. As a result, it benefits from high oil prices, which tend to spark inflation concerns and therefore buying in gold.
Elsewhere, platinum was down at 1,469 usd per ounce from 1,472 usd while sister metal palladium dipped to 347 usd per ounce from 353.50 usd.
Silver was trading at 13.59 usd per ounce against 13.85 usd. maytaal.angel@thomson.com ma/kf1/ma/ms1 COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2007 AFX News
