Gold slipped in Europe yesterday, extending the previous session's losses, as the dollar firmed against the euro and oil prices sank to a three-and-a-half year low, denting interest in the metal as an inflation hedge. In addition, rising risk aversion is prompting a sell-off of equities and commodities, while "safer" assets such as the yen and government bonds are soaring. Spot gold was quoted at $766.40/768.40 an ounce at 1000GMT, down from $770.60 an ounce late in New York on Monday. Gold is being pressured by an upturn in the dollar, which firmed against the euro on Monday after weak euro zone manufacturing data and on expectations for a rate cut from the European Central Bank later this week. The US currency extended those gains. "On Friday there was a break lower in the euro-dollar exchange rate, and that was a sign that gold was about to come off," said Societe Generale Senior Commodities Strategist Jesper Dannesboe. "Gold came off on Monday, and euro-dollar is further down now." Tumbling oil prices are also pressuring the precious metal, which is often bought as a hedge against oil-led inflation. Crude slipped to a three-and-a-half year low under $48 a barrel as signs grew that the world economy is in worse shape than previously feared, and after OPEC opted to defer an output cut. The price of other hard commodities such as copper and tin were also lower. Equity markets also fell as risk aversion intensified. World stocks slipped as investors worried about the prospect of a deep global recession, while the yen and government bonds climbed. Investors are awaiting a spate of key data due out later this week, culminating in US non-farm payrolls numbers on Friday, and interest rate decisions from central banks including the ECB, for signs as to the next direction of trade. "Investors should adopt a cautious strategy today and monitor credit market developments," said Standard Bank analyst Manqoba Madinane. "Increased credit market tension could compromise precious metal investment flows, which could mean yet further price declines". Elsewhere, imports of gold into India – the world's largest bullion market – slipped in November to around 35-40 tonnes from 54 tonnes a year ago, the Bombay Bullion Association said. Among other precious metals, silver rose to $9.34/9.42 an ounce from $9.26. Platinum steadied after falling sharply on Monday in the wake of weak Japanese car sales data, having ended that session down 9 percent. Spot platinum was little changed at $790/810 an ounce against $790.50 an ounce in New York, while its sister metal palladium eased to $167.50/175.50 an ounce from $171.50.

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