Gold steadies as US GDP data knocks euro
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Gold steadies as US GDP data knocks euro UPDATED 31 Jul 2009 | 01:34  
Gold steadies as US GDP data knocks euro

By Jan Harvey and Martina Fuchs

LONDON (Reuters) - Gold pared gains on Friday as the euro retreated from highs against the dollar in the wake of second-quarter GDP data from the United States.

Spot gold was bid at $935.10 an ounce at 1325 GMT, against $933.30 an ounce late in New York on Thursday. It earlier hit a session high of $939.65. U.S. gold futures for August delivery <GCQ9 on the COMEX division of the New York Mercantile Exchange edged up 50 cents to $935.40 an ounce.

The euro gave up ground against the U.S. currency after data released on Friday showed the U.S. economy contracted at a slower-than-expected pace in the second quarter, which analysts said backs views the recession is winding down.

"The U.S. GDP data was fairly good; it is still contracting but at a much slower pace, much better than the first quarter," said Andrey Kryuchenkov, an analyst at VTB Capital.

"But the personal consumption data wasn't so good," he added. "Inflation is not there yet, that would weigh on gold."

Gold is broadly tracking moves in the dollar within a narrow range. Dollar weakness tends to benefit gold, as it makes the metal cheaper for holders of other currencies.

The dollar fell versus a basket of currencies in earlier trade as a rise in stock markets sharpened appetite for currencies seen as higher risk.

But equity markets fell in Europe and stock index futures weakened in the United States after the data, which also showed the economy contracted more than previously reported in the first quarter of the year.

Oil prices also fell more than 2 percent as investors worried about demand weakness. Strength in crude can benefit gold, which is often bought as an inflation hedge.

DEMAND TAILS OFF

Underlying demand for gold remains weak, with a pick-up in sales in leading gold market India midweek tailing off towards the weekend and flows into gold-backed exchange-traded funds still stagnant.

But a World Gold Council official told Reuters India's gold demand may pick up from August as pent-up demand is seen boosting sales.

Meanwhile Africa's top gold producer AngloGold Ashanti said it will miss its output target for the year, adding that it will wind up its hedge book of forward sales by 2014.

Elsewhere silver was flat at $13.45 an ounce, platinum was at $1,184.50 an ounce against $1,179.50, and palladium was at $255.50 against $256.50.

Aquarius Platinum Ltd said on Friday its quarterly attributable production was up one percent from the previous quarter to 98,258 ounces.

Prices of platinum -- consumed primarily by the car industry for use in catalytic converters -- edged above $1,200 earlier this week on hopes economic stability would lift car demand.

But despite an expected fourth-quarter recovery in the European car market, analysts were cautious towards platinum.

VM Group analyst Matthew Turner said a third-quarter demand slump in Europe, a key market for platinum as its cars are usually diesel-fuelled and therefore use a higher proportion of the metal in their autocatalysts, could hurt prices.

"In the last few months car production has started to pick up again," he said. "The problem is that a lot of the car sales in Europe are artificially boosted by government incentive schemes. That is probably bringing demand forward, it's not increasing demand."

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