Weakening euro keeps gold prices under pressure

London: Gold edged lower in Europe yesterday as persistent weakness in the euro kept the precious metal under pressure, but traders were cheered by its resilience to a rising dollar in recent sessions.

Spot gold was bid at $1,121.50 an ounce at 1009 GMT, against $1,125.45 late in New York on Thursday. US gold futures for April delivery on the Comex division of the New York Mercantile Exchange eased $5.50 to $1,122.00 an ounce.

The metal traded choppily in a narrow range on Thursday, caught between downward pressure from the rising dollar and the positive impact of safe-haven buying. It is seen keeping to a relatively narrow range as it awaits further impetus.

"On the one side the dollar is weighing on prices, but on the other we are seeing continued inflows from investors," said Commerzbank analyst Eugen Weinberg. "Gold has been resilient against dollar strength, which is actually a good sign."

"As long as we are trading above $1,120, we will be pretty much rangebound," he added. "Should prices drop below there, we could see some downward pressure developing, but at the moment we are seeing a sideways move on gold."

Expectations physical demand will recover this year as prices stabilise after last year's volatility are underpinning the market, analysts said.

A senior official at the World Gold Council said on Thursday that global gold demand was expected to rise in 2010 after a fall last year, with economic recovery driving jewellery demand and fuelling investor appetite for bullion.

From a technical perspective, gold is facing few immediate pressures, traders said. "Gold is looking very ordinary near the middle of our multi week range of $1,099 to $1,145," ScotiaMocatta said in a note.

Silver was at $17.32 an ounce against $17.35.

"We continue to expect silver prices to draw upside momentum [from] gold prices rather than finding support via its own supply and demand dynamics," said Barclays Capital in a note.