NEWS / Indicators

Gold slips 2.1 pct on strong dollar, weak oil

By Atul Prakash

LONDON - Gold prices fell 2.1 percent on Monday as the dollar's rise and weaker oil prompted selling by investors who are wary of taking large positions after a recent selloff, dealers said.

"You have to expect gold to move in quite volatile ranges, between $550 (an ounce) and $600, until it finds that physical demand has adjusted to more stable prices," said Matthew Turner, analyst at Virtual Metals.

Any price rally in the current environment would peter out at the slightest provocation such as a rise in the dollar, he added.

Early buying faded fast after spot gold <XAU= rose as high as $580.10 an ounce as investors were cautious to add new positions.

Gold was trading at $569.90/570.20 by 1426 GMT after falling as low as $565.70, compared with $578.00/578.70 in New York late on Friday.

"There's some support at $566, and there are offers around $573 and $574, so I expect it to be rangebound for the time being," a European trader said at 1420 GMT.

The distraction of soccer's World Cup meant that activity later in the day was muted, he added.

Despite gold being off last week's three-month low of $543,

traders said renewed dollar strength undermined sentiment.

The dollar struck an eight-week high against the yen and rose across the board, boosted by expectations the U.S. Federal Reserve will raise short-term interest rates perhaps two more times in coming months.

A stronger dollar usually pressures gold, which is generally priced in dollars globally, because it becomes costlier in key overseas trading areas like Europe and Asia.

A weaker oil price was another factor weighing on gold.

Gold often tracks oil prices because investors use the metal as an inflation hedge when energy prices are high.

"The current mood of sharp price swings looks set to continue, but for now it seems gold has found a base ahead of $550," said James Moore, analyst at TheBullionDesk.com.

In other precious metals, silver fell as low as $9.83 an ounce before rising to $9.94/10.04, against $10.13/10.23 late in New York.

Platinum drifted down to $1,138/1,144 an ounce from $1,147/1,155 in the U.S. market, while palladium edged down to $294/299 an ounce from $300/305.