LONDON, Dec 1: Gold hovered in European trade on Thursday below this week’s 18-year peak but the precious metal was seen consolidating for a while and gathering steam to launch another rally, dealers said. Contrary to some predictions that a move above $500 an ounce would spark heavy selling by investors to book profits, gold held steady and showed no signs of any sharp decline.

Spot gold was quoted at $494.40/495.00 by 1108 GMT, compared with $494.10/494.90 in New York on Wednesday. It surged to $502.30 an ounce on Tuesday, the highest since December 1987.

The market is just consolidating a bit but I think there is still room on the upside to go, said James Moore, analyst with TheBulliondesk.com. We are going to probably test up to around $509-$512 before the Christmas holiday period.

Analysts said fundaments had been positive for the metal and people were diversifying their portfolios as currencies were not offering strong returns. There were still inflation concerns with oil prices staying quite high.

The metal has also attracted new interest amid geopolitical unease and overall economic uncertainty and on expectations that Russia, Argentina and South Africa are friendly to boosting the amount of gold in their reserves.

Gold prices have doubled since touching lows of $254 in 2001. It has gained more than 15 per cent this year.

Some industry officials said the rally has further to run and may exceed its all-time high of $850, achieved in 1980.

Moving into the end of 2005, having already achieved its target of $500, gold may be expected to enter a consolidation or corrective phase, probably dipping as low as $480, Standard Bank said in a report.

For the New Year, increased investment demand and geopolitical concerns may spur the metal higher, with targets set at $525 and possibly even higher towards $550.

In other precious metals, platinum fell to a 1-week low of $972 an ounce in Asia before rebounding to $983/987 in Europe, higher than $975/980 last quoted in New York.

Palladium was at $255/259, compared with $256/260 an ounce in New York. Silver dipped to $8.25/8.28 an ounce from $8.27/8.29. —Reuters