Gold, silver near 4-1/2 year lows as dollar strength bites

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold languished near its lowest level since April 2010 on Thursday as investors dumped the safe-haven metal amid strength in the dollar and on fears that $1,000 an ounce is the next target.

Silver, under pressure from the dollar and sliding gold, was trading close to its lowest since February 2010 after losing 4 percent in the previous session.

The sell-off in gold began last Friday, when the metal broke through $1,180 - the lowest level hit during last year's 28 percent plunge. Since then, dollar strength and breaks below other technical levels have built the case against gold.

Technical analysts have said a test of the $1,000 level could be on the cards following a break of support at $1,150 an ounce, a key retracement level.

Spot gold ticked up 0.3 percent to $1,143.80 an ounce by 0419 GMT. It tumbled over 2 percent to a 4-1/2 year low of $1,137.40 on Wednesday, following sharp losses after falling through support at $1,160 and $1,150.

"The bears seem to be well and truly in charge. Near term, it is hard to argue otherwise," said ANZ analyst Victor Thianpiriya.

He noted lack of interest from buyers in China as a particular concern. The top consumer of the metal typically buys a lot of jewellery, bars and coins whenever prices fall, providing a floor to down markets, but that hasn't happened this time around.

"There seems to be little interest from Chinese dealers in physical gold. The inability of premiums to rally significantly despite the sharp decline in the gold price is telling," Thianpiriya said.

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

India, the second biggest buyer, hasn't seen any fresh buying either at lower price levels.

"One of the possible explanations of such a lack of physical support could be that investors are waiting on the sidelines for further pullbacks in the price or price stability," Societe Generale analyst Robin Bhar said. Weakness in local currencies could also be a factor, he said.

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Traders are awaiting the U.S. nonfarm payrolls report on Friday, which they think could turn out to be another key trigger for gold. A strong report could boost the dollar and dull bullion's safe-haven appeal even further.

The dollar was trading close to a four year high against a basket of major currencies on Thursday, after Republicans won control over both chambers of the U.S. Congress for the first time since 2006, lifting investor expectations for more pro-business policies. [USD/]

Weakness in the euro as investors eyed the European Central Bank's policy meeting and last week's surprise move by the Bank of Japan to expand its stimulus measures have also provided a boost to the greenback.

The strength in the dollar also took down other precious metals. Silver firmed but was trading close to 4-1/2 year lows of $15.13 an ounce reached on Wednesday. Platinum fell below $1,200 before recovering slightly.

While physical demand for gold has been lacklustre, buying interest for silver coins has been strong. The U.S. Mint said on Wednesday it has temporarily sold out of its American Eagle silver coins, while retailers in Asia and the United States were struggling to get supplies of the Canadian Maple Leaf silver coins.

(Editing by Tom Hogue)