LONDON, Sept 27: Gold fell about one per cent in Europe on Tuesday, with participants watching currency movements and the potential resumption of gold sales by European central banks for a clearer direction, dealers said. They said that in the short term gold could come under pressure as the dollar surged, making the precious metal costlier for holders of other currencies.

The start on Tuesday of the second year of a five-year pact regulating gold sales by European central banks also dampened sentiment. Spot gold was quoted at $461.30/462.00 a troy ounce by 1436 GMT versus $466.30/467.00 in late New York trade on Monday. It surged to a near 18-year high of $475 last week.

Nothing much has been happening as yet. Markets have been quite quiet. I guess a lot of market participants are awaiting the central bank gold sales agreement starting today, said Yingxi Yu, precious metals analyst with Barclays Capital.

In the near term, gold was likely to trade in a range between $460 and $470, traders said.

The European Central Bank Gold Agreement allows its 15 signatories to sell up to 500 tonnes of bullion over the next 12 months. Some traders said the selling could start immediately to take advantage of high gold prices.

Crude oil prices edged lower on Tuesday on signs that crude supplies remain plentiful, even with all US Gulf of Mexico oil output locked in after Hurricane Rita.

Lower oil prices would reduce inflationary expectations and that could cause gold prices to ease as it is often seen as a hedge against inflation.

Nobody is really sure what would trigger the market. That’s why the market is stuck in a range, said Peter Hillyard, head of precious metals sales, Europe, at ANZ Investment Bank.

Silver tracked gold’s movements and traded at $7.24/7.27 an ounce, down from the late New York’s level of $7.33/7.36.

But platinum rose marginally to $913/917 from $912/916, while palladium was at $192/196 versus $191/194.

A drop in platinum prices to about $900 an ounce could induce both physical and fund buying to hold prices above that level, traders said. —Reuters