* Gold down as ECB cuts rate to record low, China surprises
* Disappointment over cenbank actions, deflation fears weigh
* ETF, physical gold demand lags
* All eyes on Friday's payrolls report for Fed outlook
(Recasts, adds details, updates market activity)
By Frank Tang
NEW YORK, July 5 Gold fell on Thursday on a
dollar rally and frustrations over a lack of more aggressive
market stimulus from central banks after China, Europe and
Britain eased their monetary policies.
Bullion, which has tumbled several times this year after the
Federal Reserve did not mention easing, was under pressure again
after the top three central banks loosened monetary policy and
signaled a growing level of alarm about the world economy.
Gold's inflation-hedge appeal was weakened by the prospect
of a global economic slowdown.
"Deflation at this particular point is the overwhelming
worry," said Frank McGhee, head precious metals traders at IBS
Still, gold has gained almost 4 percent since last Friday on
hopes of more Fed action after data showed U.S. manufacturing
shrank in June for the first time in nearly three years.
Some dealers also stayed on the sidelines ahead of Friday's
closely watched U.S. nonfarm payrolls report.
"If the job numbers coming out tomorrow are better than
expected, then you eliminate or start to change the psychology
of any imminent Fed action," McGhee said.
Spot gold was down 0.5 percent at $1,607.69 an ounce
by 2:27 p.m. EDT (1827 GMT).
U.S. gold futures for August delivery settled down
$12.40 at $1,609.40 an ounce. Trading volume after Wednesday's
U.S. Independence Day holiday was about 10 percent below
average, preliminary Reuters data showed.
The metal initially rose to a session high of $1,623.80
after China unexpectedly lowered its lending rate to 6 percent,
but the rally fizzled as investors worried the
better-than-expected jobs data might kill any hopes of more Fed
Gold has been particularly sensitive to central banks'
monetary policies. In February, it was up 15 percent for the
year after the Fed said it would keep interest rates near zero
until late 2014.
On Thursday, bullion is only up less than 3 percent.
Silver dropped 1.3 percent to $27.74 an ounce.
A U.S. employment report on Thursday showed private-sector
employers added 176,000 jobs in June, topping economists'
expectations and could bode well for employment data on Friday.
Friday's monthly jobs report is expected to show 90,000
workers were added to nonfarm payrolls in June and the
unemployment rate held at 8.2 percent.
PHYSICAL DEMAND DISAPPOINTS
Gold investment demand has fallen recently on economic
uncertainty and has resulted in the dollar surge against the
euro after the ECB rate cut.
Holdings of gold in exchange-traded funds, often used as a
gauge of longer-term investor demand, have eased this week, but
hovered near March's record high.
In India, one of the world's leading consumers of gold,
demand for the metal remained weak as a recent drop in the rupee
to record lows made local gold prices expensive during a
traditionally lean buying season.
Among platinum group metals, platinum eased 65 cents
to $1,472.08, and palladium inched down 0.1 percent to
2:27 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold AUG 1609.40 -12.40 -0.8 1597.50 1624.50 156,147
US Silver SEP 27.672 -0.608 -2.1 27.495 28.380 43,093
US Plat OCT 1477.70 -13.70 -0.9 1466.00 1493.80 8,574
US Pall SEP 585.75 -13.15 -2.2 584.65 605.95 3,631
Gold 1607.69 -7.44 -0.5 1598.10 1623.80
Silver 27.740 -0.370 -1.3 27.560 28.380
Platinum 1472.08 -0.65 0.0 1468.33 1487.25
Palladium 577.75 -0.38 -0.1 586.75 599.75
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 169,187 193,294 194,194 19.56 0.12
US Silver 49,794 61,078 57,993 29.59 -1.34
US Platinum 8,684 12,366 9,083 23 0.00
US Palladium 3,837 4,892 4,605
(Additional reporting by Susan Thomas, Veronica Brown and
Amanda Cooper in London; Editing by Bob Burgdorfer)