Gold dips from six-week peak as dollar firms, physical demand eases

By Jan Harvey

LONDON (Reuters) - Gold slipped on Wednesday from the previous day's six-week peak as the dollar rose to a one-week high against the euro and on signs of softening physical demand.

Prices were supported at the lower levels however by worries over the global economic outlook, heightened this week after China said third-quarter growth was the slowest since 2009. That had lifted appetite for counter-cyclical assets such as gold.

Spot gold was down 0.3 percent at $1,244.85 an ounce at 1340 GMT, while U.S. gold futures for December delivery were down $6.50 an ounce at $1,245.20. On Tuesday gold rose to its highest since Sept. 10 at $1,255.20 an ounce.

"A lot of buying went through yesterday despite a lower euro, but gold failed to (decisively) breach the $1,255 level. I think we may see a correction today lower," said Afshin Nabavi, head of trading at MKS in Switzerland.

"India, Malaysia and Singapore are closed for holidays, and also with the U.S. dollar strengthening, gold is coming off," he added.

The dollar extended broad gains, hitting session highs against the yen and Swiss franc and a one-week high versus the euro after U.S. September consumer prices rose marginally.

European shares edged up, meanwhile, on upbeat company earnings results and hopes of corporate bond buying by the European Central Bank.

While gold in the short term is hostage to moves in the wider markets, its resilience at the $1,180 level, which it bounced off for a third time earlier this month, is reviving investors' interest in the metal, analysts said.

GOLD BUYING EASES IN CHINA

Gold buying in number one consumer China has weakened after prices rose, dealers said, while Indian demand is also likely to be lower following the festival of Diwali this week.

"The Chinese were sellers today, which was of no real surprise, but did not chase the market lower," precious metals house MKS said in a note. "The premium today on the Shanghai Gold Exchange was a little lower, which was reflective of the broad-based selling, sitting between $1-$2 over spot."

China and India dominate the world physical gold market, accounting for more than half of global fabrication demand for the metal between them.

Spot platinum was down 0.5 percent at $1,265.75 an ounce, while spot palladium was up 0.1 percent at $773 an ounce. Silver was down 1.5 percent at $17.25 an ounce.

Official customs data showed China's platinum imports fell 18.5 percent in September to 8,615 kg, and were down by a similar percentage in the year to date.

China's silver imports were little changed in September at 243,071 kg, the data showed, while its palladium imports were up 5 percent at 2,050 kg last month and 28 percent year to date.

(Additional reporting by Veronica Brown; Editing by William Hardy and David Evans)