Gold slips in London

Gold extended losses on Thursday as the dollar rose to session highs against the euro, with concerns over the depth of the eurozone crisis pressuring the single currency, and as traders remained reluctant to add to long positions ahead of year-end. Spot gold was down 0.3 percent at $1,609.90 an ounce at 1440 GMT, having earlier risen as high as $1,616.50. Prices are well off the record $1,920.30 an ounce they hit in early September, but remain up 13 percent on the year.
While in the summer months gold rose strongly in times of risk aversion as investors sought it out as a safe haven, it is now moving more in line with assets seen as higher risk, like stocks and the euro, which tend to rise at the dollar's expense. "People are not looking at gold as a safe haven, and that is one of the reasons for this lacklustre performance," said Commerzbank analyst Eugen Weinberg. "I wouldn't be surprised to see further weakness in gold prices going forward."
"The price increase before was also due to speculative interest, and that seems to be abating, which I find healthy. Gold will be forming a bottom in the coming months, and due to the higher risks ahead, I think prices are likely to increase." The euro hit a session low against the dollar as the US currency benefited from safe haven flows, with no clear resolution to European sovereign debt problems in sight. The euro had risen in earlier trade on hopes the nearly half a trillion euros in three-year funds that banks borrowed on Wednesday from the European Central Bank would ease current funding strains, but this optimism soon petered out.
The threat of mass credit ratings downgrades for eurozone countries is still hanging over the market, with Standard & Poor's yet to announce if it will cut ratings on any of the 15 countries it has on credit watch negative. US gold futures for February delivery were down 70 cents an ounce at $1,612.90. Among other commodities, oil prices firmed a touch after data showed a sharp drop in US crude stocks, while base metals prices were largely higher.
Gold prices are likely to take a breather, analysts said, after failing to hold above the 200 day moving average near $1,621 an ounce, which they fell through last week and briefly rose back above on Wednesday. "We still see little chance for gains here until year end," said VTB Capital in a note. "Gold will stall below short-term resistance at $1,620, in our view. The market failed to breach it yesterday, also having tested more resistance at $1,640."
On the physical markets, gold demand in number one consumer India remained sluggish on Wednesday, dealers in Mumbai said, largely due to seasonal factors. The period of Khar Mass, which runs from December 16 to January 14, is considered inauspicious for gold buying.
Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, dropped by nearly 389,000 ounces on Wednesday, the fund said. Among other precious metals, silver was down 0.1 percent at $29.32 an ounce. Spot platinum was down 0.5 percent at $1,414.75 an ounce, while spot palladium was up 0.2 percent at $632.47 an ounce.