By: Angela Sharda

London 20/09/2012 - Gold edged lower in Thursday morning trade in Europe when the dollar strengthened against when the euro, prompting investors to take profits in the yellow metal.

Spot gold was last at $1,763.26-1,763.52 per ounce, down $7.65 from Wednesday’s close. The euro slipped below 1.3 against the US dollar and was last at 1.2981, having been as low as 1.2939 earlier. The single currency hit a four-month high of 1.3173 on Monday this week.

“Across the metals space doubts have started to creep in after the rally over the last few days. Dollar strength is weighing on the complex which is causing gold to lose its shine,” Standard Chartered analyst Daniel Smith said.

The German flash manufacturing PMI beat the expected 45.4 at 47.3, while the services PMI was back above 50 at 50.6. But the French manufacturing PMI was at its worst since April 2009, at 42.6, while the services component dipped to 46.1.

Still, the average yield on Spain's 10-year bonds dropped to 5.67 percent in today's auction from 6.65 percent at the previous auction and the bid-to-cover ratio was 2.8 times compared with 2.4 times previously.

And UK retail sales in August were better than expected although they dipped - they were down 0.2 percent, beating the forecast for a fall of 0.4 percent.

Elsewhere, the HSBC Flash Manufacturing Survey for September for China came in at 47.8 points, suggesting an 11th straight month of contraction.

Other data out today includes EU consumer confidence and the US leading Index and Philly Fed manufacturing index.

The rally in precious metals triggered by announcements of looser monetary policy by central banks across the globe in recent weeks has faded. The Bank of Japan announced on Wednesday that it will increase its asset buying and loan programme by 10 trillion yen ($127 billion).

Its move also comes on the heels of recent major monetary easing announcements by the US Federal Reserve and the European Central Bank. Central bank accommodation is generally viewed as supportive of gold because it devalues paper currencies and leads to future inflation.

In India, Hindu festival has encouraged a slight pick-up in gold buying are market participants are generally pinning their hopes on Diwali, the festival of lights, in November to provide a major boost to the ailing domestic physical market.

“There has been a small amount of gold buying in India for the festival,” a source said.

In other precious metals, silver was last at $34.34-34.40 per ounce, down 25 cents from Wednesday’s close. Platinum was last at $1,605.25-1,615.25, down $28.25, and sister metal palladium at $660-666 was down $6.50.

Workers at Lonmin's Marikana operations in South Africa are returning to work today, according to reports, after violent strikes in which 46 people were killed.

Lonmin, the world's third largest platinum producer has agreed to pay a bonus of 2,000 rand ($245) and an average wage increase of between 11 and 22 percent to striking workers at Marikana, it said.

It will update the market on the wider implications of the agreement, including its financial impact, in due course, it added.


(Additional reporting by Tom Jennemann, Eddie van der Walt and Kathleen Retourne, editing by Mark Shaw)