* Dollar halts recent losses, pressures gold
* Bullion down despite oil rally; gold/oil ratio below 14
* Gold buying picks up in India for Dhanteras festival
(Recasts, updates comments, closing prices, market activity,
adds second byline, dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 15 (Reuters) - Gold dropped 1 percent
on Thursday as the dollar stemmed recent losses and the metal
consolidated gains after a sharp rally to record highs in the
last two sessions.
Bullion retreated in spite of a rally in oil, which has
risen for the past six straight days, outperforming gold. Gold
is used as a hedge against inflation.
Analysts said that a combination of technical weakness,
renewed credit worries and record speculative long positions in
the futures market prompted selling in gold.
"We've seen the dollar bounce back today, which is why
we've seen this consolidation," said Andrey Kryuchenkov, an
analyst at VTB Capital.
"I don't see at this point in time that the gains in gold
are justified. You have massive speculative exposure ... and
this money can't keep coming forever."
December gold futures <GCZ9> settled down $14.10, or 1.3
percent, at $1,050.60 an ounce in COMEX trade.
Spot gold <XAU=> was at $1,049.70 an ounce at 2:26 p.m. EDT
(1826 GMT), against $1,061.90 late in New York on Wednesday.
The dollar index <.DXY> clawed back from the 14-month lows
it hit in early trade. []
A firmer dollar tends to pressure gold, as it curbs the
metal's appeal as an alternative asset and makes it more
expensive for holders of other currencies.
Gold failed to receive a boost even after oil rose more
than $2 to just below $78 a barrel.
A closely watched gold-to-oil ratio has dropped to below
14. Technical traders often switch positions between gold and
oil when one is perceived to be cheaper relative to the other.
Appreciating oil prices, often seen as a trigger for rising
inflation, usually lift gold.
Frank McGhee, head precious metals trader at Integrated
Brokerage Services, said that gold was pressured by stop-loss
orders and the dollar strength, but its long-term fundamentals
remained positive.
"Gold at the moment is on its own," McGhee said
Traders said U.S. bank Citigroup's quarterly per-share loss
due to $8 billion of credit losses stirred worries about the
financial sector, triggering weakness in gold.
INDIAN DEMAND PICKS UP
Physical demand for gold picked up in India for the
Dhanteras festival, typically an auspicious time for gold
buying, as prices softened. India was the world's biggest gold
consumer last year. []
However, recent rallies encouraged speculation in the New
York gold futures market, which suggested that a period of
consolidation may be due, analysts said.
Among other precious metals, silver <XAG=> was at $17.40 an
ounce against $17.85, tracking the correction in gold, while
palladium <XPD=> was at $324 against $326.50.
Platinum <XPT=> was at $1,345.50 an ounce against $1,358,
having hit a 13-month high of $1,362.50 an ounce on Wednesday.
"Platinum is holding onto its gains to new highs," said
technical analysts at Barclays Capital in a note. "Such price
action is encouraging for further gains into the $1,400 area."
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1050.60 -14.1 -1.3 884.3 18.8
US silver <SIZ9> 17.415 -0.493 -2.8 11.295 54.2
US platinum <PLF0> 1355.50 -11.10 -0.8 941.50 44.0
US palladium <PAZ9> 328.15 -2.65 -0.8 188.70 73.9
Prices at 2:26 p.m. EDT (1826 GMT)
Gold <XAU=> 1049.60 -12.30 -1.2 878.20 19.5
Silver <XAG=> 17.41 -0.44 -2.5 11.30 54.1
Platinum <XPT=> 1345.50 -12.50 -0.9 924.50 45.5
Palladium <XPD=> 324.00 -2.500 -0.8 184.50 75.6
Gold Fix <XAUFIX=> 1053.50 1.00 0.1 836.50 25.9
Silver Fix <XAGFIX=> 17.54 -39.00 -2.2 14.76 18.8
Platinum Fix <XPTFIX=> 1337.00 10.00 0.7 1529 -12.6
Palladium Fix<XPDFIX=> 326.00 1.00 0.3 365.0 -10.7
(Editing by Christian Wiessner)
