LONDON, Oct 21: Gold edged up in Europe on Friday due to weakness in the US currency and good physical demand, but softer crude oil prices could prompt some players to exit the market, dealers said.

The metal remained fundamentally strong and could gather enough steam to spike further in the longer term, but faced a risk of fund-led correction in the immediate future, they said.

Spot gold traded at $462.90/463.70 an ounce by 0917 GMT after a dip below $460 to three-week lows the previous day, compared with New York’s $460.90/461.60 late on Thursday. It surged to a near-18 year high of $480.25 last week.

The market is consolidating and I would expect a softer trading range today, said a precious metals trader in London.

He said gold was getting some support from physical demand and was expected to hover in the range of $460-$465 on Friday.

Some traders said gold could face resistance from buyers at around $475 and ounce, but any drop to about $457 could generate fresh interest in the metal.

The dollar’s rally ran out of steam early on Friday, while the euro gained support from hawkish comments made by European Central Bank chief economist Otmar Issing.

Gold generally rises with a fall in the US currency, as dollar-priced metal becomes cheaper for holders of other currencies. But the traditional relationship had weakened in the last few weeks.

Dealers said weak crude oil prices eased inflation worries to some extent, prompting some players to offload their positions.

Oil prices slipped below $60 a barrel after a 2.2 per cent slide the previous day as US oil and natural gas stocks swelled, revealing weaker demand in the world’s top consumer.

My short-term view remains a fund-led correction back to $445-4450, however physical buying from India is set to emerge around the $450 level and should prevent gold from falling much lower, James Moore of TheBulliondesk.com said in a report.

Physical demand rose in India, the world’s largest gold consumer, ahead of the peak festival time in early November. Buyers in other parts of Asia were also active because of the Eid al-Fitr religious festival next month.

Barclays Capital said on Thursday gold has potential to spike towards $500, though funds may liquidate holdings near the end of 2005.

In other precious metals, platinum rose to $924/928 an ounce from $921/925 an ounce late in New York.

Sister metal palladium was quoted at $207/211 an ounce from $206/210 in the US market.

But silver eased to $7.58/7.61 an ounce from $7.60/7.63 in New York. —Reuters