Gold dips on equity rally

LONDON (Reuters) - Gold hit a low of $893.70 an ounce on Thursday after UK Prime Minister Gordon Brown said the G20 will ask the International Monetary Fund to bring forward its programme of gold sales and as equities extended gains.

The precious metal had already slipped 3 percent earlier in the session as tentative hopes for a recovery in the world economy boosted interest in other assets such as stocks and industrial commodities, diverting interest from gold.

Spot gold was quoted at $899.00/901.00 an ounce at 1533 GMT (11:33 a.m. EDT) from $926.40 late in New York on Wednesday.

U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange slipped $25.10 to $901.00 an ounce.

“Equity markets have bottomed and I think gold will therefore suffer from here,” Citigroup analyst David Thurtell said.

U.S. stocks rose for a third straight session on Thursday on optimism the G20 leaders' meeting in London will succeed in tempering the global economic crisis. .N

Leaders of the G20 nations agreed on Thursday to pump an extra trillion dollars into the troubled global economy through extra funding for groups like the International Monetary Fund.

“The crucial question will be whether markets are satisfied with what the leaders of the G20 decide on stimulating the economy,” said Peter Fertig, a consultant at Quantitative Commodity Research in Germany.

“If (investors) get the impression that the worst is over, that stock markets are going to stabilize further... that would be a negative factor for gold,” he said.

Brown also said the G20 had asked the IMF to bring forward its programme of gold sales, raising funds to help the poorest countries. Any acceleration of official sector sales is likely to weigh on prices.


The euro extended gains against the dollar after the ECB said it is cutting its refinancing rate by 25 basis points to 1.25 percent.

The ECB would decide on whether to take further non-standard steps in its monetary policy at its next meeting in May, the bank’s president Jean-Claude Trichet said.

A weaker dollar typically benefits gold, which is often bought as an alternative asset to the currency. However, the impact of currencies on the metal are being outweighed by other factors, such as risk aversion.

The markets are also awaiting key U.S. non-farm payrolls data on Friday for fresh impetus, traders said.

Among other precious metals, platinum was steady, showing little reaction to a smaller-than-expected 37 percent drop in U.S. auto sales in March.

The metal, which is mainly used as a component in catalytic converters, shed nearly two-thirds of its value last year after hitting a record high in March, as the global slowdown battered the car industry.

Spot platinum was at $1,137.50/1,147.50 an ounce from $1,133.50, while spot palladium was at $215.50/220.50 an ounce from $218.

Spot silver eased to $12.75/12.81 an ounce from $13.01, taking its cue from gold.

Editing by Sue Thomas