LONDON, Nov 8: Gold eased on Thursday tracking weaker oil prices as investors took profits from the previous session’s spike to 28-year highs just shy of a record peak. Spot gold eased to $832.75/833.45 per ounce from $833.00/833.80 late in New York on Wednesday, when it hit a high of $845.40 — last seen in January 1980 and less than $5 below its record high of $850.

While analysts saw potential for prices to make a fresh attempt at the highs, heavy speculative positioning on the New York COMEX futures market also raised the possibility of a sharp correction.

It’s still driven by oil and the euro. As long as the dollar is weak and oil is on the upside, you have to go with the rally, said Michael Kempinski, metals trader at Commerzbank.

I don’t say gold is dropping right now, but the danger of a drop is increasing every day. And this will be a heavy correction for sure, he said.

The dollar hovered close to record lows against the euro as the market waited to see whether the European Central Bank would voice concern about the sharp rally in the single currency.

The ECB is widely expected to announce no change in its 4.0 per cent interest rate later on Thursday, so all eyes will be on what President Jean-Claude Trichet says about the conflicting challenges of euro strength and a jump in inflation.

The market consensus expects that rates will be held unchanged, which is already sufficient to support gold. Any hawkish comment from the ECB during the press conference would be bullish for gold as it could weaken the dollar further, Dresdner Kleinwort said in a daily note.

Oil prices pulled further back, having stalled just short of $100 a barrel after fresh signs of weak US oil demand and a Wall Street slump fuelled profit-taking from a near 40 per cent rally in under three months.

Gold is up more than 30 per cent on the year and has taken flight since the troubles took root in US credit markets, with the metal variously seen as an inflation edge or a safe haven from market turmoil.

In other bullion markets, US gold futures rebounded from lows, with the December contract up $1.0 at $834.4 in electronic trade. The benchmark October 2008 contract in Tokyo closed down 37 yen or 1.2 per cent at 3,053 yen a gram.—Reuters