Dollar cedes ground to euro after Thursday's surge Gold retreated towards $1 100 (R8 327) an ounce on Friday as the euro gave up its early gains against the dollar, with reports that Iranian troops had made a brief foray into Iraqi territory prompting buying of the US currency. Spot gold was bid at $1 100.65 an ounce at 16:10 SA time, against $1 097.80 late in New York on Thursday. US gold futures for February delivery on the COMEX division of the New York Mercantile Exchange fell $4.80 to $1 102.60. The Iran report lifted oil prices, which rose more than 2 percent to above $74 a barrel, but gold, which often reacts to geopolitical tensions, shrugged it off to remain within their earlier range. "Some scrap selling stands against some investor buying, and that is keeping (gold) rangebound," Heraeus trader Alexander Zumpfe said. Gold rose more than 1 percent earlier in the day, recouping some of the previous session's 3.5 percent losses, as the dollar retreated from the 3-1/2 month high it hit against the euro in the previous session. Gold prices found support around $1 080-$1 100, but analysts say they may be vulnerable to further losses through to year-end, especially if further dollar strength is seen. "Trading will be relatively thin in the coming days so investors may be reluctant to take on positions in this market, and may be closing some positions," said Commerzbank analyst Eugen Weinberg. "As most investors have been on the positive side, the closure of those long positions might dampen sentiment and might dampen prices." The dollar was lacklustre against most major currencies apart from the yen, but pared losses against the euro after sources told Reuters Iranian troops had briefly entered Iraqi territory on Thursday. Iraq's deputy interior minister denied the reports. Strength in the US unit curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies. DOLLAR EYED Gold traders will be closely eyeing developments in the foreign exchange market, which will be the major influence on gold towards year-end. "So far the metal has however managed to stay above the support level of $1 080 an ounce," said precious metals trading house Heraeus in a weekly report. "Whether this level will be tested before Christmas depends mainly on the US dollar." "Should this continue to gain further, gold could come under further pressure," it said. "However, should (it) stabilise or perhaps lose value again, gold could then consolidate between $1 110 and $1 140 an ounce." On the investment side of the market, Swiss bank Julius Baer said it expects to see an outflow of 30 000 ounces from its gold exchange-traded product on Friday. In India, the world's biggest bullion consumer last year, spot gold prices fell on Friday as buyers continued to stay away expecting a further dip in prices, dealers said. Among other precious metals, silver was bid at $17.17 an ounce against $17.13. BNP Paribas lifted its silver price forecasts to $14.60 in 2009 an ounce from $14.40, and to $16.60 an ounce in 2010 from $15.10, citing higher gold prices. "A stronger than expected rebound in global industrial production in the second half of this year and a further IP buoyancy in Asia in 2010 also underpin the upward revision to our silver price profiles," the bank said in a note. Platinum was at $1 416 an ounce against $1 421, and palladium was at $364.50 against $359.- Reuters

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