Gold edges off four-year low, awaits U.S. payrolls data

By Jan Harvey

LONDON (Reuters) - Gold edged higher on Thursday as a slump in prices to four-year lows tempted some buyers back to the market, but moves were muted ahead of key U.S. non-farm payrolls data due at the end of the week.

Fresh strength in the dollar -- a rally in which knocked prices to their weakest since early 2010 on Tuesday -- following comment from the European Central Bank pulled the metal back from earlier highs at $1,149, but it remained supported.

Spot gold was up 0.4 percent at $1,145.90 an ounce at 1500 GMT, while U.S. gold futures for December delivery were down 30 cents an ounce at $1,145.40.

Mitsubishi analyst Jonathan Butler said while gold was set to track sideways ahead of the non-farm payrolls numbers, it was vulnerable to further losses after ECB President Mario Draghi affirmed the bank's balance sheet would be expanded to 2012 levels -- signalling it would pump more money into the euro zone economy in a bid to revive growth.

"The macro picture is clearly orientated towards further dollar strength in the future, if Draghi's commitment to roll out further stimulus programmes is to be taken at face value," Butler said.

"It's hard to see any further upside (for gold) from here, though given the $1,140 level seems to be holding for now, perhaps this is an area of consolidation where we are going to see some further physical demand coming through."

The euro hit a two-year low against the dollar after Draghi's comments on Thursday, while shares jumped and peripheral European bond yields fell. [MKTS/GLOB]

Draghi also told a news conference the ECB's governing council was unanimous in its commitment to using additional unconventional measures to boost growth, if needed.

The U.S. non-farm payrolls report on Friday could boost expectations that the Federal Reserve will move to tighten monetary policy before other major central banks, while lifting the dollar further.

CHARTS POINT TO FURTHER LOSSES

A surge in the dollar, in which gold is priced, has knocked the metal in recent days through key chart support at $1,180 an ounce -- the lowest level hit during last year's 28 percent plunge -- and $1,155 to its lowest since early 2010 at $1,137.40.

Technical analysts have said a test of the $1,000 level could be on the cards after a break of support at $1,155, a retracement level of its rally to record highs in 2011.

Other than the dollar strength, analysts were concerned about the lack of robust demand in China, the top consumer of the metal, which typically buys a lot of jewellery, bars and coins whenever prices fall.

"Chinese gold buyers, who in the past often took advantage of falling prices as a cheap way of buying into the yellow precious metal, are still biding their time," Commerzbank said.

Prices on the Shanghai Gold Exchange were trading at a discount or on a par with the global benchmark on Thursday. They have been at a discount for most of this week, hinting at sluggish demand.

Silver was up 0.1 percent at $15.36 an ounce. Silver prices were also battered earlier this week, tumbling more than 4 percent on Wednesday, their biggest one-day retreat in more than a year, to a 4-1/2 year low of $15.13.

Among other precious metals, spot platinum was down 0.2 percent at $1,119.99 an ounce, while spot palladium was down 0.1 percent at $753.72 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Evans and Mark Potter)