Gold slips on firmer dollar

Trading was thin, however as investors wait for the release of Q2 GDP figures from the US

SINGAPORE (Reuters)  - 

Gold edged down on Friday after the dollar firmed against the euro, but trading was thin as investors awaited the release of U.S. second quarter GDP data for clues on the direction of the economy.

With worries about the debt crisis in Europe diminishing, gold could attract safe-haven buying as growth in the U.S. economy probably slowed in the second quarter on slower consumer spending. For a preview, click:

Gold eased 65 cents to $1,167.40 an ounce by 0304 GMT, having risen on Thursday after St. Louis Fed President James Bullard said that he is worried about the risks the United States could fall into a Japan-style quagmire of falling prices.

"On a longer-term basis, it will fuel demand for gold if your economic recoveries have stalled. Equities might not perform so well," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

"For today, I don't see it going up above $1,175 for the upside. On the downside, I think it should be still supported above the $1,155 level."

Bullion struck a lifetime high at $1,264.90 in June on worries the debt crisis in Europe was spreading and the U.S. economy was slowing.

But a string of Europe's largest firms issued surprisingly upbeat profit reports on Thursday, bolstering an abrupt renewal of investor confidence in the region after months of debt turmoil and fears for the euro.

U.S. gold futures for August delivery fell $1.1 $1,167.3 an ounce after settling $8 higher.

Silver hardly moved, while platinum slipped to track declines in equities and LME copper. Sister metal palladium also dropped after rising 4 percent on Thursday on firm euro and options-related buying.

There was a lack of physical buying in platinum group metals in Asia, with many factories shut for the summer holidays.

"There's no reason to do anything today and technicals look bearish. There's a bit of pressure from the dollar but physical buying prevents prices from falling further," said a dealer in Hong Kong. "There's a bit of buying from jewellery makers."

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings were unchanged at 1,282.279 tonnes. The holdings hit a record at 1,320.436 tonnes on June 29.

The Nikkei lost more than 1 percent on Friday after U.S. stocks sagged in volatile trading following weak outlooks from technology companies and downbeat comments from a Federal Reserve official.

The dollar eked out small gains against the euro in early trade on Friday, but remained on the defensive near a three-month low against a basket of currencies on concerns U.S. growth may be disappointingly weak.

© Thomson Reuters 2010 All rights reserved

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