Gold bounces after slide, softer dollar supports

By Jan Harvey

LONDON (Reuters) - Gold bounced in Europe on Thursday as investors, encouraged by a slight softening of the dollar and a firmer tone to oil, hunted bargains after the metal hit a five-week low in the previous session.

Traders are awaiting key U.S. data, including U.S. preliminary GDP figures due out later on Thursday and payrolls numbers on Friday, that are expected to set fresh direction to trade.

Gold climbed to $912.70/913.70 an ounce at 5:50 a.m. EDT from $907.20/908.40 an ounce late in New York on Wednesday. The precious metal dropped as low as $893.50 an ounce in the last session, its weakest since June 26, as the dollar rose.

"The dollar is slightly weaker compared to yesterday and the oil price is higher, (which) explains gold's move back above the $900 level," said Calyon metals analyst Robin Bhar.

The dollar weakened a touch against the euro on Thursday, retreating after it climbed on above-consensus ADP jobs data on Wednesday.

The greenback's dip supported a wave of bargain hunting as investors took advantage of Wednesday's more than 1 percent slide in gold prices. A softer dollar tends to benefit gold, as it encourages buying of the precious metal as a currency hedge.

Oil prices are also supporting buying on Thursday, as crude largely held the nearly $5 gains it posted in the previous session. Gold is often bought as a hedge against oil-led inflation.

"Gold will take its cue from what happens to currencies and the oil price," Bhar at Calyon added. "Today and tomorrow, we get some fairly key US data."

This session will see the release of first estimate U.S. GDP data for the second quarter, which is expected to show a 2.0 percent annualized growth rate, compared to 1.0 percent in the first quarter.

Chicago purchasing managers' index data are also due at 11:45 a.m. EDT, while Treasury Secretary Henry Paulson is due to speak on markets and the economy at 3 p.m. EDT. All could affect the dollar, and consequently gold.

PGMs RECOVER

Platinum and palladium, both largely used by carmakers as a component in autocatalysts, ticked up on Thursday, having slipped in gold's wake in the previous session.

Spot platinum rose to $1,750.00/1,770.00 an ounce from $1,725.00/1,745.00 late in New York on Wednesday.

"Concerns of slowing growth in the US and western Europe continue to dampen platinum's sentiment," said James Moore, an analyst at TheBullionDesk.com.

"However, with many auto-makers reporting strong sales in the BRIC nations, metal loadings are likely to increase in the coming year due to tighter emissions," he added.

"With the metal to see a substantial supply deficit this year we anticipate further price weakness will be limited."

Spot palladium rose to $375.50/383.50 an ounce from $371.50/379.50 late in New York. Silver edged up to $17.52/17.57 an ounce from $17.50/17.56.

(Reporting by Jan Harvey; Editing by Peter Blackburn)