LONDON, Oct 6: Gold inched lower in European trade on Thursday with a drop in crude oil prices, but a weak dollar was expected to put some upward pressure on prices, dealers said.

The market was quiet and traded in a narrow range in the past sessions, partially because of Chinese, Jewish and Islamic holidays. Some dealers said there was a risk of further downward correction.

Spot gold traded at $465.40/ 466.10 a troy ounce, down from $466.00/466.70 last quoted in New York. It has risen by about 4 per cent in a month, but away from a near-18-year peak of $475 on Sept. 22.

As a whole, the market has been quite slow so far today. Overall, the market is still keeping an eye on oil. It is also watching the dollar, said James Moore of TheBulliondesk.com.

We are seeing a bit of range-trade at the moment as gold continues to consolidate.

Crude oil slid for a fifth day on Thursday and touched its lowest level in two months after US data showed a drop in demand in the world’s biggest consumer.

Gold is often seen as a hedge against inflation.

The stability in the gold market is all the more surprising given the recent moves in the dollar, said Alan Williamson in a daily report.

The ongoing very heavy fund long position in the market has also cautioned consumers about chasing the market higher, with many expecting a downward correction.

Gold has not strictly tracked the dollar in recent weeks but it has broken from inverse link to the currency, as factors like worries about inflation and geopolitical events and market technicals have moved to the forefront.

Gold consumption in India, the world’s largest gold consumers, is expected to surge nearly 33 per cent in 2005 to 850 tons because of higher incomes and good farm output, the World Gold Council said.

Consumption, excluding recycled gold, rose 57 per cent to 508 tons in the first half of the year, from 322 tons during the year-ago period, Sanjeev Agarwal, the council’s managing director for the Indian subcontinent told Reuters.

Gold had been consolidating after investment funds boosted the net long position in New York to a record high last week, raising concerns about a sell-off, traders said.

Silver was at $7.38/7.41 versus $7.41/7.44, while platinum rose to $920/924 from $915/918 last quoted in New York.

Palladium edged up to $192/ 195 from $191/194. —Reuters