February 17, 2006	Friday	Muharram 18, 1427

LONDON, Feb 16: Gold prices steadied in Europe on Thursday as buying resurfaced after active selling overnight on a firm dollar and easing oil prices, dealers said. The market was expected to remain choppy in absence of any clear direction, but the metal was seen gaining strength in the medium term after consolidating around current levels.

What we are seeing is three steps forward and two steps back. This is a part explanation of what’s going on, said John Meyer, analyst at Numis Securities Ltd.

He said this was not the end of the bull run and the market had just paused for a breather.

Gold hit a 25-year high of $574.60 an ounce this month on tensions over Iran’s nuclear ambitions and high oil prices.

Spot gold fell to $535, just above a five-week low of $534.50 hit earlier this week.

It later rose to $540.00/540.90 from $539.50/ 540.40 late in New York on Wednesday.

Declines in Tokyo futures also weighed on gold earlier.

The recent fall in energy prices and speculation of higher US interest rates are making investors nervous ... Market volatility is set to remain extremely high in the coming sessions, James Moore, analyst at TheBullionDesk.com, said in a daily report.

The dollar stayed close to a recent six-week high against the euro after Federal Reserve chief Ben Bernanke signalled the central bank would continue with dollar-boosting interest rate hikes to curb inflation.

A strong dollar generally tends to limit demand for gold as a currency alternative.

Analysts said gold would be influenced by other markets, such as base metals which edged lower on Thursday on the London Metal Exchange.

Given the increased correlation between base and precious metals over recent months, any further weakening in base metal prices would be a distinct drag on gold, said Alan Williamson, analyst at HSBC Bank.

Oil traded around $58 a barrel after sliding 15 per cent this month on bulging US oil inventories that provide a more comfortable supply cushion against output disruptions.

Platinum traded at $1,000/1,004 an ounce, unchanged from New York levels, after falling to a five-week low of $990. Palladium was at $275.50/279.50 versus $282/286.

Silver edged down to $9.14/ 9.17 an ounce from $9.20/9.23.

—Reuters