Gold drifted lower on Friday morning in quiet trade as the market continued to track currency moves amid good physical demand at the lower levels, dealers said. In other precious metals, platinum was fixed at a fresh 24-year peak on Asian investor buying and was seen going even higher. Gold eased to $391.75/392.40 an ounce by 1148 GMT, versus $394.80/395.30 quoted in New York late on Thursday. The metal fell to a three-month low of $390.50 on Thursday as the dollar gained half a percent against the euro. "It's all totally dollar-euro related, but I very much doubt that the market will fall through $390.00 as we've seen quite a bit of physical buying from small buyers particularly from the Middle and Far East," one dealer said. The dollar steadied near one-month highs against the euro as traders waited to hear what German Chancellor Gerhard Schroeder would say about currencies when he meets U.S. President George W. Bush later on Friday. A stronger U.S. currency makes dollar-denominated gold less attractive to holders of other currencies like the euro. The euro was quoted at $1.2391 , near Thursday's four-week low of $1.2382. The dollar's rise was partly driven by speculation that the European Central Bank (ECB) might cut interest rates next week after Schroeder on Wednesday urged the bank to act to help exporters.
Gold has broadly tracked movements in the dollar against other currencies, especially the euro. It jumped to a 15-year peak of $430.50 an ounce on January 6 when the euro touched a lifetime high against the dollar. "The next move will continue to depend on the FX-markets, our currency traders expect another short-term test of $1.2350, but foresee a recovery of the Euro in the coming week. This would point at a lower gold price today, but then ultimately bring support for the battered metal later," Wolfgang Wrzesniok-Rossbach of Dresdner-Kleinwort Wasserstein said in a daily report. Platinum , used in jewellery and auto-catalysts, jumped in Asian trade to set a fresh 24-year high at $877.00 an ounce before cooling slightly to trade in Europe at $870.00/875.00 an ounce by 1148 GMT, compared with $864.00/869.00 previously. "Strong market fundamentals and high speculative interest continue to suggest a test towards $900 over the coming weeks," said John Reade of UBS Investment Bank. Silver was quoted at $6.58/6.60 compared with $6.69/6.71 late in New York on Thursday, while palladium stood at $230.00/235.00 an ounce from $225.00/230.00.///