Gold slips 0.6% as dollar firms

London: Gold eased below $1,100 (Dh4,040) an ounce in Europe Wednesday as the dollar rose nearly 1 per cent versus the euro, with persistent worries over the fiscal health of debt-laden Greece weighing on the single currency.

Spot gold was bid at $1,094.55 an ounce at 1027 GMT, against $1,101.65 late in New York on Tuesday. US gold futures for April delivery on the Comex division of the New York Mercantile Exchange fell $9.10 to $1,094.60 an ounce.

"If we continue to have nervousness over Europe and the euro, then we are likely to see supported dollar values and therefore slightly weaker gold values," said David Wilson, an analyst at Societe Generale.

The move comes ahead of a European Union summit later this week, and after Germany signalled it may accept European financial aid for Greece as a last resort.

Uncertainty over Greece is likely to continue to weigh on the euro, Credit Agricole said in a note.

"It looks unlikely that the summit will generate any concrete EU plans that will sufficient to assuage market nerves," it said.

"Instead it seems that the Germans and the French, if speculation is to be believed, both agree that the IMF should be involved in any support."

Euro-priced gold is benefiting from weakness in the currency, rising 0.4 per cent to 819.42 euros an ounce versus 816.04 euros late on Tuesday.

Gold typically falls as the dollar firms, as strength in the US unit curbs gold's appeal as an alternative asset and makes it more expensive for holders of other currencies. That link weakened earlier this year, but has since been restored.

The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, said its holdings rose 4.6 tonnes on Tuesday to 1,120.079 tonnes, their highest since January 7.

"The increase in ETF holdings yesterday [Tuesday] is encouraging, as is the scale of buying around and below $1,100, and suggests further pockets of investment diversification will continue to underpin prices," said TheBullionDesk.com analyst James Moore.

Supply side

On the supply side, the Russian Gold Industrialists' Union said the country's gold output would fall 10 per cent year-on-year in the first quarter. Russia was the world's fifth largest gold producer last year.

Silver was bid at $16.68 an ounce against $16.97, tracking losses in gold, while platinum was at $1,587 an ounce against $1,607 and palladium slipped to $450.50 against $464.50.

Changing trend