LONDON, Oct 20: Gold prices inched up in Europe on Thursday, hovering way below last week’s near 18-year peak, but could face further liquidation by funds as softening crude oil prices lowered inflation worries.

A strong dollar was seen putting some pressure on gold and dealers saw a range-bound trade, but the medium-term outlook remained bullish.

Spot gold was trading at $464.40/465.10 an ounce compared with $463.75/464.50 last traded in New York on the previous day. It surged to $480.25 an ounce last week.

Gold still has potential to move higher again this year, but I think for now we are going to head lower and that would be a very good buying opportunity for the Indian market, said James Moore of TheBulliondesk.com.

Physical demand in India, the world’s largest gold consumer, has been subdued so far in the festival season because of high prices. Dealers said purchases would surge if prices drop to about $450-$455 an ounce.

Crude oil fell on Thursday, deepening losses triggered by swelling US crude and gasoline inventories and fresh signs of eroding consumption.

Worries about inflation due to high energy prices had sparked heavy fund buying in the bullion market last week, which pushed gold up to its highest level in nearly 18 years.

Consumer demand was expected to prevent gold from falling much lower in the near term, but going ahead, the metal was seen gaining strength again.

Continuing inflationary, global geo-political and US economic worries are also likely to prove supportive, and possibly provide the impetus for further rallies toward $500, if gold can manage to consolidate around the mid-$460’s to correct the recent overbought conditions, Standard Bank said in a note.

A strong US currency makes dollar-priced metal expensive for holders of other currencies, and discourages some buyers.

The dollar stabilised near this week’s two-year high against the yen and three-month peak versus the euro hit on expectations for higher US interest rates, but its momentum was slackening after this month’s rally.

Silver fell because of liquidation by speculators, but unlike gold, lacked physical buying at lower price levels, dealer said.

Spot silver fell to $7.57/7.60 an ounce from New York’s $7.59/7.62.

Platinum dropped to $918/922 an ounce from $924/928 an ounce late in New York. Sister metal palladium was at New York’s level of $205/209.

—Reuters