Gold ticks up as dollar eases, but still near 4-1/2 year low

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold edged up slightly on Thursday as the dollar took a breather after a sharp rally, but the safe-haven metal continued to languish near its lowest level since April 2010 with fears mounting that $1,000 an ounce is the next target.

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.

Many see the dollar's drop on Thursday as only a blip and expect the greenback to continue to strengthen as the Federal Reserve looks likely to increase interest rates sooner rather than later, and on robust economic data.

Before today's losses, the dollar hit a four-year high against a basket of major currencies on Wednesday, boosted by last week's surprise move by the Bank of Japan to expand its stimulus measures, and after Republicans won control over both chambers of the U.S. Congress. [USD/]

"Don't try to catch a falling knife," ABN Amro analyst Georgette Boele said regarding gold prices. "The U.S. dollar rally has further to run especially if the Fed turns more hawkish this year."

ABN Amro says gold could drop to $1,100 by year-end, and $800 by the end of next year.

Spot gold ticked up 0.3 percent to $1,144.10 an ounce by 0728 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.

Technical analysts have said a test of the $1,000 level could be on the cards following a break of support at $1,154 an ounce, a key retracement level.

Silver, under pressure from the dollar and sliding gold, was trading close to its lowest since February 2010 of $15.13, after losing 4 percent in the previous session. Platinum fell below $1,200 briefly but recovered.

Other than the dollar strength, analysts were concerned about the lack of robust demand in China. 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," said ANZ analyst Victor Thianpiriya.

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.

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.

They were also eyeing the European Central Bank policy meeting later in the day for currency movements.

(Editing by Tom Hogue and Biju Dwarakanath)