Gold slips, Europe gloom weighs ahead of G20

SINGAPORE: Spot gold inched lower on Thursday, tracking the downbeat sentiment in riskier assets as investors remained worried about the euro zone's debt crisis ahead of a Group of 20 summit.

Gold has been rangebound in the past week or so, with the threat of a potentially disastrous Greek default burnishing gold's safe-haven appeal while fears of a liquidity crunch in case of a default have kept gains in check.

France and Germany, angered at Greece's shock move to call for a referendum on its latest bailout plan, told Prime Minister George Papandreou on Wednesday that Athens would not receive EU aid until it decides whether it wants to stay in the euro zone.

A Group of 20 summit is to take place on Thursday and Friday, with Europe's debt crisis expected to dominate the talks.

"There are too many things to watch out for," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers in Hong Kong. "People are waiting for more news on euro zone and how the economy fares."

Gold may remain in a range between $1,700 and $1,750 in absence of news that could point to a clear direction, traders said.

Spot gold lost 0.6 percent to $1,727.29 an ounce by 0738 GMT, snapping two consecutive sessions of gains.

US gold was flat at $1,728.50.

Spot gold could drop to $1,705 an ounce during the day, said Reuters market analyst Wang Tao.

Asia's physical gold buying slowed as high prices and uncertainty around the euro zone's debt crisis pushed market participants to the sidelines.

Asian shares, the euro and commodities fell on Thursday as fears that Europe's debt crisis could unleash financial chaos prompted investors to shed riskier assets in favour of the relative safety of the dollar, ahead of a rate decision by the European Central Bank and the G20 summit.

The ECB was expected to hold interest rates steady, after the US Federal Reserve on Wednesday said it was mulling the possibility of buying more mortgage debt to spur a struggling recovery but offered no new stimulus, to the disappointment of some gold investors.

The previous two rounds of quantitative easing by the Fed, dubbed as QE1 and QE2, helped propel gold on its record-setting rally from 2009.

Spot silver dropped as much as 2.8 percent to $33.25, before regaining some lost ground to trade at $33.41.

"With the uncertainty on QE3, and lack of physical demand from industrial users, silver is going neither here not there," said a Shanghai-based trader.

Holdings of the iShares Silver Trust , the world's largest silver-backed exchange-traded fund, edged down 4.07 tonnes from a day earlier to 9,776.14 tonnes by November 2.

Copyright Reuters, 2011