Gold turns lower as dollar firms, oil falls
LONDON (Reuters) - Gold reversed earlier gains of almost 3 percent on Thursday as the dollar turned higher and oil prices declined.
Spot gold was at $739.00/741.50 an ounce at 11:57 a.m. EDT compared with $754.30 late in New York on Wednesday. It earlier rose to $776.30 an ounce, the highest price since October 21.
"We are seeing a similar pattern to base metals with a strong opening and then giving up all the gains," said Nick Moore, strategist at Royal Bank of Scotland. "The dollar strength is one element."
The dollar hit session highs against the euro after trading lower for most of the global session, as investors bought back the greenback to rebalance portfolios for month-end purposes.
"There will be quite a lot of jockeying tomorrow as we come to the last trading day and I wouldn't be surprised to see a fairly wild day for not just gold but a number of other commodities," Moore said.
Lower oil prices also reduced gold's appeal as a hedge against inflation.
Oil fell toward $65 a barrel, retreating from earlier gains, pressured by concerns demand might continue to weaken as the U.S. economy shrank in the third quarter. <O/R>
The world's largest economy shrank at a 0.3 percent annual rate in the third quarter, the sharpest contraction in the United States in seven years.
Gold, which traded around $800 earlier this month, was still well below the record high of $1,030.80 hit in March, after a rally to a two-month high of $931 on October 10 was met by heavy selling.
"Precious metal sentiment received a much needed boost yesterday as the dollar retreated after the Fed's rate cut," analyst Manqoba Madinane at Standard Bank said in a research note.
Gold is still down almost 12 percent since the start of the month, on track for its biggest monthly decline since 1983, as an earlier rush for safe-haven assets gave way to a cross-commodity sell-off by investors scrambling for cash.
"I think all the preconditions are there for gold to take a very healthy run. The physical demand for gold has actually exceeded the ability to supply right around the world," said Ian Smith, managing director of Newcrest Mining Ltd (NCM.AX), Australia's largest gold producer.
Silver was trading at $9.86/9.96 an ounce after rising almost 7 percent to a high of $10.50 against Wednesday's $9.82.
Platinum was trading at $808.50/838.00 an ounce, after earlier hitting a high of $870.00 an ounce from $793.50.
Lonmin Plc (LMI.L), the world's third-largest platinum producer, said the outlook for platinum prices remained challenging.
Prices for platinum have fallen about 45 percent so far this year and there has been a liquidation from platinum exchange traded funds in recent days.
"From a peak of nearly 500koz in July, holdings have been reduced to about 245koz now, with a large, 46koz redemption noted on 29 October from ETF securities, more than a quarter of its holdings in a single tranche, John Reade, UBS precious metals analyst, said in a note.
Palladium was at $193.5/203.5 from $194.50.
(Editing by Karen Foster)
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