Gold hovers near four-year low as crude drops, dollar rallies

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold fell on Monday, hovering near a four-year low, as the combination of tumbling crude oil prices and a U.S. dollar rally extended gold's losses to a fourth consecutive session.

Bullion's near-term price outlook remains vulnerable after spot gold broke below $1,180 an ounce, a level bullion had held twice during its last two major sell-offs in June and December last year, analysts said.

An unexpected acceleration of U.S. manufacturing activity in October deepened market speculation the U.S. Federal Reserve will raise interest rates sooner than expected.

"The prospect of firmer rates, coupled with our expectation for a stronger dollar, present significant headwinds for gold," said Suki Cooper, precious metals analyst at Barclays Capital.

"In the near term, physical buying is likely to offer some support on the downside," Cooper said.

U.S. coin dealers reported a surge in gold and silver coin demand by retail investors on Friday, when gold slid 3 percent to $1,161.25, its lowest since 2010.

Spot gold was down 0.5 percent to $1,168.60 an ounce by 2:40 p.m. EST (1940 GMT), having earlier fallen to as low as $1,161.70.

U.S. COMEX gold futures for December delivery settled down $1.80 an ounce at $1,169.80, with volume in line to finish at their 30-day average, preliminary Reuters data showed.

Gold was under heavy pressure as U.S. crude oil futures tumbled nearly 3 percent to around $78 a barrel, their lowest since June 2010, and the dollar index rose to a four-year high.

"If anything, you might have expected gold to have fallen further, given the perfect storm of events that are negative for the gold price," Capital Economics analyst Caroline Bain said.

Bain said that there is minimal safe-haven demand at the moment due to strong economic growth, a dollar rally and expectations the Fed could raise interest rates soon.

Friday's drop in prices did little to spark interest among normally price-sensitive Asian buyers of physical metal, dealers said. In China, the world's biggest buyer of gold, local prices slipped to a discount to the global benchmark.

Outflows from SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, accelerated in October, with holdings of the fund now at a six-year low.

Among other precious metals, silver was down 0.3 percent at $16.10 an ounce.

Platinum group metals rose after U.S. automakers reported their strongest October sales in years.

Spot platinum was up 0.6 percent to $1,236 an ounce and spot palladium was up 1.3 percent to $798.50 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore and Fayen Wong in Shanghai; Editing by Jane Baird and Chris Reese)