Jan Harvey
RTGAM



LONDON - Gold eased in Europe on Thursday, pressured by dollar strength as a widening of Greek-German yield spreads dented the euro, but strong chart-based support helped prices to stay above $1,150 (U.S.) per ounce.

Gold priced in euros benefited from the single currency's losses as Greece's debt woes moved into sharp focus, lifting demand for the precious metal a safe store of value. Spot gold was bid at $1,152.05 an ounce at 1014 GMT, against $1,153.90 late in New York on Wednesday. U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange fell $8.00 to $1,151.00 an ounce.

The metal was being underpinned by strong technical support, traders said, after prices hit four-month highs at $1,168.70 at the beginning of this week, when a combination of safe-haven buying and dollar weakness swept prices onto higher ground.

"We saw the upward move last week in gold and... it seems the market is happy with the levels we are seeing," said Deutsche Bank trader Michael Blumenroth. "There is still some demand for gold for safe-haven purposes."

"We should find good support at $1,140-1,150. That has been established as the downside as we take a breather and get some strength for the next upward move. I think $1,180 will be the target next week, and ahead of May."

Other key commodities oil and copper came under pressure from the firmer dollar and as unexpectedly strong Chinese growth data fuelled speculation that monetary policy will tighten to stop the economy overheating - potentially hitting demand.

The euro hit a session low in early European trade after the spread between 10-year Greek and German government bond yields widened a touch to 406 basis points.

Investors are demanding a higher premium on Greek debt as uncertainties remain over an aid package agreed by euro zone finance ministers last weekend to help the debt-laden country service its mounting debt.

Physical Demand Eases

Physical demand for gold eased on Thursday as high prices put off buyers in key bullion consumer India. Dealers noted steady demand there last week whenever gold slipped below $1,150 an ounce.

Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust , held steady at a record 1,141.041 tonnes on Wednesday.

Other precious metals also fell in line with gold, with palladium recording the biggest drop as traders cashed in gains after the metal rose on Wednesday to a two-year high at $548.50 an ounce, lifted by expectations demand will rise this year.

Technical analysts at Barclays Capital, who study past price moves for indications of the future direction of trade, said the outlook still looked good for palladium.

"Having tripled in value and after fifteen consecutive bullish months, the uptrend in palladium is accelerating relentlessly and is on course to retest the 2008 peak at $595," they said in a note.

"The technical outlook is still positive, as trending measures are not yet at historic extremes."

Platinum was at $1,710.50 an ounce against $1,726, while palladium was at $535.50 against $546. Silver was bid at $18.23 an ounce against $18.39.

Minor precious metal rhodium, which like platinum and palladium is primarily used as a component in catalytic converters, also rose to 18-month highs at $2,900 an ounce.

All the platinum group metals are benefiting from expectations car demand, particularly from China and also the United States, will strengthen this year.