Gold steadies in Europe, seen roaming in range

LONDON, June 7 (Reuters) Gold steadied after choppy trading on Thursday but remained vulnerable to declines as the dollar rose against major currencies.

Spot gold was quoted at $669.00/669.50 an ounce by 1437 GMT after rising as high as $672.40 and falling to $665.90, compared with $669.20/670.70 in New York late on Wednesday and Tuesday's three-week high of $673.95.

''It was looking a bit wobbly this morning even though it was up. I think there were a few people who thought we are going to see a rally and it came to nothing . So they just reversed some of their positions,'' said a metals trader in London.

''It's a bit range-bound and looking for direction.'' The dollar rose broadly as a spike in U.S. Treasury yields boosted demand for the U.S. currency and news that North Korea fired short-range missiles off its coast hurt the yen.

''I think the first move would probably be on the downside, but we will see pretty good demand down there,'' said Michael Kempinski, precious metals trader at Commerzbank, referring to the direction of gold price.

''I would buy the dip, to be honest,'' he said, adding there was probably some gold selling by producers on Wednesday and that put a pressure on the metal.

Gold fell to a five-week low of $651.30 an ounce on May 24 before recovering, but has failed to breach $675 despite a few attempts.

Calyon Corporate and Investment Bank said some of the usual fundamentals driving gold had not been supportive, which was one of the reasons why it had not performed well recently.

''We believe that the traditional fundamentals will make it more difficult for gold to perform well going forward, especially in the third quarter, which is normally the weakest period of the year,'' it said in a research note.

S.AFRICA WAGE NEGOTIATIONS Traders kept a watch on developments in South Africa, the world's largest gold producer, and said any strike by miners might help the bullion market.

Unions from the South African mining industry, which generates billions in export revenue, have said they may join in to support the massive public servants' strike that started last Friday demanding higher wages. [ID:nL05878417] Analysts said producer de-hedging would continue this year and provide support to the gold market in the long run. Hedging allows producers to lock in profits for future output, but it can backfire if metals prices rise above the hedged price.

Australian gold producer Newcrest Mining Ltd. said it was considering closing out its gold hedge book and looking at its gearing levels as part of a review of its capital structure. [ID:nSYD29923] In other metals, platinum rose to a two-week high of $1,306/1,311 an ounce, against $1,290/1,295 in New York.

Platinum specialist Johnson Matthey met forecasts with a 10 percent rise in underlying profit and predicted continued good demand for catalysts, which use platinum and palladium to reduce vehicle emissions. [ID:nL07482654] Palladium was at $365/3369 an ounce, down $1, while silver was up just 2 cent to $13.70/13.74 an ounce.

REUTERS SR RS2041