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GoldSINGAPORE: Gold held steady and silver slid on Monday, pressured by a firm dollar as fears about the euro zone debt crisis deepened ahead of a meeting of the bloc's finance ministers.

The euro slid to a seven-week low against the dollar after IMF Chief Dominique Strauss-Kahn, a key voice in euro zone debt talks, was charged with sexual assault, increasing uncertainty on aid for Greece and other indebted euro zone countries.

The dollar index , a measure of the greenback's strength against a basket of currencies, advanced to its highest since early April.

Spot gold was little changed at $1,493.09 an ounce by 0625 GMT, after ending flat in the previous week. Prices had fallen by about 5 percent from the lifetime high of $1,575.79 hit on May 2.

US gold was nearly unchanged at to $1,493.10.

"Gold could reverse recent falls and stand above the support level of $1,500 over the next week, as safe-haven buying could resume on re-ignited euro zone sovereign debt concerns," said Natalie Robertson, commodities strategist at ANZ.

Euro zone finance ministers are likely to back a bailout package for Portugal in a meeting later on Monday.

Spot silver fell nearly 3 percent to $34.23, before regaining some lost ground to $34.54, in thin and volatile trade.

US silver fell by 1.3 percent to $34.58.

"The market is very quiet and waiting for fresh interest," said a Singapore-based trader, "People are cautious and don't want to put on a position and see the market move in the other direction."

Market participants are awaiting a speech by the US Federal Reserve chief Ben Bernanke later in the day, in which he was expected to repeat the stance that the Fed is in no rush to raise interest rates.

Gasoline and food prices pushed US inflation to a 2-1/2-year high in April, but there was little sign of a broader pick-up in consumer prices that would trouble the Fed.

The Shanghai Gold Exchange, China's main precious metals bourse, said it will lower the margin requirement on silver forward contracts (T+D) to 15 percent on Monday's settlement from 18 percent, after market volatility ebbed.

Shanghai silver fell as much as 5 percent and was trading at 7,575 yuan per kilogram.

A decline in the prices of precious metals in recent weeks fueled an exodus of investment interest in exchange-traded funds, as well as in futures and options markets.

Holdings in the SPDR Gold Trust , the world's largest gold ETF, declined to a one-year low of 1,192.253 tonnes on Friday.

Managed money sharply scaled back their bullish bets in COMEX silver futures and options to the lowest level since January, as prices tumbled as much as 30 percent from a record high near $50 an ounce, US regulator data showed on Friday.

Rising global inflation, uncertainties in euro zone's fiscal conditions and ongoing unrest in the Middle East and North Africa will likely to continue to drive nervous investors to precious metals, especially gold, analysts said.

"With the outlook for PGMs (platinum group metals) blemished by the disruption in the global auto sector supply chain and silver continuing to trade in extremely volatile conditions, we expect investors will look increasingly toward gold to hedge systemic financial risk," said Morgan Stanley in a research note

Copyright Reuters, 2011

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