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Gold To Consolidate In Europe

Gold consolidates in Europe as inflation fears fade

Gold fell in Europe on Thursday, consolidating as inflation fears faded with easier oil prices, dealers said.

Spot gold softened to $406.30/406.80 an ounce by 1508 GMT, compared with $407.25/408.05 quoted late on Wednesday in New York.

Prices pushed up briefly to a high of $408.95 earlier on news that workers at Harmony gold Joel mine had been on strike since Tuesday. The company later reported that it had reached an agreement with workers to end the stoppage.

Dealers said bullion had just moved back in step with currencies after breaking away to follow surging oil prices -- making a four-month high last week as investors hedged against a potential inflation risk.

Safe-haven support also came into play on Wednesday after two Russian plane crashes raised suspicions of a terror attack.

Traders and analysts were upbeat on the price as gold had managed to hold above psychological support at $400 even though the euro had softened.

"I think gold is looking well bid as the market has been largely independent of the euro this week," Barclays Capital analyst Kamal Naqvi said.

"There seems to be evidence that some people have been willing to hold on to gold as a defensive play," he added.

Over-the-counter options expired in London, but dealers said activity was relatively quiet.

The euro hit its lowest in almost three weeks against the dollar as investors awaited U.S. gross domestic product figures ad a speech from the U.S. Federal Reserve chief on Friday.

Markets are keen to see whether Fed Chairman Alan Greenspan will make upbeat comments about the U.S. economy in a speech on Friday, echoing his colleagues who spoke earlier in the week.

This week's comments from Fed officials raised expectations for another U.S. rate rise, a move which tends to boost demand for the U.S. currency and tarnish the appeal of dollar-priced gold.

HSBC metals analyst Allan Williamson said gold looked ripe for another stretch higher, having priced in the strong possibility of a U.S. interest rate rise in September.

In other precious metals, spot silver firmed marginally to $6.60/6.63, compared with $6.59/6.62 last quoted in the U.S. market.

Platinum touched a high for the day at $855 in Asian activity before settling back to $853.00/858.00 from $847.00/852.00 in New York.

Dealers said the market should stay in fairly narrow ranges over the rest of the day, with $855.00 at the upper end.