(Updates prices)
By Lewa Pardomuan
SINGAPORE, Sept 16 (Reuters) - Gold slipped more than 1
percent on Friday, heading for its biggest weekly drop since
March 2009, as stock markets gained and the euro rose after
major central banks around the world strived to fight the debt
crisis in Europe.
U.S. Treasury Secretary Timothy Geithner will discuss with
European finance ministers the possibility of leveraging the
euro zone's bailout fund as the world's main central banks aim
to ease dollar funding for stricken banks.
Spot gold fell $21.45 an ounce to $1,767.19 by 0634
GMT after falling 2 percent in the previous session. Bullion
struck a record around $1,920 last week on concerns the euro
debt crisis could stall global growth.
"We favour maintaining our negative trading affair bias in
today's trade," said Tom Pawlicki, precious metals and energy
analyst at MF Global.
"Additional pressure will come from low expectations for
quantitative easing at next week's FOMC meeting, and from
technical factors which argue for a move down to $1,700-$1,750
an ounce in our opinion," he added.
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U.S. gold futures GCcv1 fell $11.30 an ounce to $1,770.10
as investors looked to next week's meeting of the Federal
Reserve's Federal Open Market Committee (FOMC) on interest
rates.
The Fed, facing rising global financial strains and
recession fears, is poised to increase downward pressure on
longer-term interest rates next week in a bid to accelerate a
sputtering U.S. recovery.
Next week's focus could also switch back to the dollar when
the FOMC meets, with any hints policymakers are considering
another round of quantitative easing likely to weigh on the
currency.
Asian stocks jumped on Friday as the relatively stable euro
ahead of a European finance ministers meeting reflected hopes
for an important policy move to fight the region's debt crisis,
which had initially triggered rallies in gold.
"We're in a consolidation, a very small one, since the
beginning of September. Going forward now, we're probably going
to test somewhere the lows that we have seen at the end of
August," said Dominic Schnider, an analyst at UBS Wealth
Management, referring to gold's correction from highs.
"If people are expecting a QE3 right now, they could be
disappointed. The hurdle is very high for a QE3."
Many market watchers said the Fed's programme of bond
purchases through June 30, known as quantitative easing or QE2,
helped drive up commodity prices by providing cheap money to
investors who placed it in risky assets.
Gold prices are likely to break through $2,000 an ounce by
year-end to new record highs, metals consultancy GFMS said in a
report on Thursday, as inflation pressures in Asia and debt
concerns in the West lead to a recovery in investment demand.
The euro clung to gains against the dollar on Friday,
boosted by key central banks coordinated action to add liquidity
to the European banking system, but the rally is unlikely to
last as the Greek debt crisis remains in a critical state.
Oil was headed for a weekly gain on Friday after central
banks launched coordinated action to boost European bank
funding, easing concern about falling oil demand from
industrialised consumers.
