LONDON, Dec 17: Gold edged down in Europe on Wednesday as traders took profits after the previous session’s 2 per cent gains on the back of a larger-than-expected interest rate cut from the US Federal Reserve.

Spot gold was quoted at $855.60/857.60 an ounce at little changed from $857.35 an ounce late in New York on Tuesday. US gold futures for February delivery were up $14.70 at $857.40.

Gold is likely to consolidate after recent sharp moves, analysts said. We have jumped so much in a relatively short period of time without any major changes on the fundamental side, said Wolfgang Wrzesniok-Rossbach, the head of sales at Heraeus.

While gold was benefiting from dollar weakness and safe-haven buying as a result of the financial crisis, physical demand for bullion was tailing off as prices rose, Wrzesniok-Rossbach said.

Fundamentally the situation might not be 100 per cent positive, but everything related to the financial crisis is positive for gold.

Gold climbed in late New York trade on Tuesday after the Fed said it was cutting rates to between zero and 0.25 per cent, knocking the dollar lower and prompting further rate cuts from Hong Kong and Kuwait.

Physical demand for gold was mixed, with traders reporting falling interest in gold coins and bars in Europe and Indian buyers said to be staying away until prices fall.

Among other precious metals, platinum and palladium were little changed.

The two metals, which are primarily used to make catalytic converters, have fallen sharply in recent months on fears demand would suffer from a slowdown in car sales.

Platinum is now trading close to parity with gold, a situation last seen in 1996. However, the metal is likely to recover next year, analysts said.

Current price levels for platinum group metals are not sustainable for many South African producers unless there is a sharp weakening of the rand, said Fairfax analyst Marc Elliott.

Spot platinum was quoted at $856/866 an ounce against $860.50 late in New York on Tuesday, while palladium was at $176.50/181.50 an ounce against $178.—Reuters