Gold leads precious metals slide on firmer dollar

London: Gold slid more than 3 per cent in Europe on Monday as the strengthening dollar knocked the metal's appeal as a currency hedge, and oil prices retreated from highs.

Other precious metals tumbled in gold's wake, with silver falling 8 per cent , platinum 3 per cent and palladium 6 per cent .

Spot gold was quoted at $851.65/853.65 an ounce at 1445 GMT, down from $873.20 an ounce late in New York on Friday, having touched a session low of $843.50.

US gold futures for February delivery on the COMEX division of the New York Mercantile Exchange were down $26.60 at $852.90 an ounce, having earlier touched a low of $843.50.

"The dollar is the critical factor today," said BNP Paribas analyst Michael Widmer.

The US currency extended gains against the euro to a fresh three-week high on Monday on hopes US President-elect Barack Obama will unveil fresh measures to boost the economy.

Obama is due to meet House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid later in the session to discuss their legislative agendas.

Obama officials have been discussing an economic stimulus bill in the range of $675 billion to $775 billion.

The euro has also been battered by poor Italian and Spanish inflation data and tax cuts in Germany, which are expected to add pressure on the European Central Bank to cut interest rates soon.

"Gold's move in the last couple of days is almost entirely due to the strength of the dollar," said UBS commodity strategist John Reade. "The number one, front centre driver of the dollar gold price is where euro-dollar is going."

The euro-dollar exchange rate "moved sharply higher in December and has come off in the first couple of trading days of this year," he added. "It has dragged gold with it."