central banks worldwide would like to sell gold fa

LONDON, May 13 (Reuters) - Gold dropped in Europe on Thursday
morning, with the market tracking the euro down, but prices were expected to consolidate above
$372.00 an ounce as dealers tried to glean clues about the U.S. economy.

Bearish influence also came from Muhammad Al-Jasser, vice governor of the Saudi Arabian Monetary Agency, who told Reuters in an interview on Thursday that central banks worldwide would like to sell gold faster but were worried this would make the price collapse.

Data showing a wider than expected U.S. trade gap hit the dollar on Wednesday with economic
concerns surfacing over the impact of higher oil prices.

Expectations of higher U.S. interest rates returned to buoy the dollar, combined with remarks
by Al-Jasser that the euro was still not fully competitive as a reserve currency.

Higher interest rates tend to make U.S. bonds more attractive to overseas investors and increase
demand for the dollar, which dulls the attraction of dollar-denominated gold for non-U.S. investors.

"It's mostly currency related again on gold although there is a bit of physical buying coming
in and building quite a solid base above the $372.00 level," one dealer said.

Spot gold was trading at $374.50/375.25 a troy ounce by 1033 GMT, compared with $377.75/378.50
last quoted in New York. The dollar was at $1.1833/36 after touching an intraday peak of $1.1817.

Dealers said the market was now waiting for U.S. producer prices index (PPI) data (1230 GMT)
and April consumer prices on Friday for clues on the timing of a U.S. interest rate rise.

"We're just settling down into a $372.00-378.00 level for the next couple of days. Gold is taking stock as the rest of the commodity index settles down and waits for oil prices to retreat slightly," the dealer added.

Oil prices are flirting with record highs as accelerating demand tests OPEC supply limits.

Analysts said that bullion's immediate direction would continue to depend on the dollar,
despite supportive influences from physical demand and geo-political worries.

"While gold is still very strongly influenced by the direction of the dollar, we expect further
downside pressure in the very short term with a risk to test prices around $371 again," UBS Investment
Bank said in a daily report.

In other precious metals, platinum rode higher as the market continued building upward
momentum from recent sharp drops, with resistance at $800 firmly in sight, dealers said.

Spot platinum stood at $791.00/796.00, compared with $784.00/789.00 in New York on Wednesday.
Palladium was also looking positive at $240.00/244.00, from $238.00/243.00 in late U.S.
trade.

Silver fell on the back of gold to $5.50/5.53, versus $5.54/5.57 previously.

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