(Recasts, updates with market activity, closing prices,
changes dateline to NEW YORK, pvs LONDON)
By Frank Tang
NEW YORK, Jan 18 (Reuters) - Gold bounced from a one-week
low on Friday after this week's climb to a record above $900 an
ounce, but the market could consolidate before charging higher,
fund managers and analysts said.
U.S. President George W. Bush's plan announced on Friday to
give the U.S. economy temporary tax cuts and other measures
totaling about $150 billion failed to boost the gold market as
the dollar gained slightly versus the euro on the news.
However, price volatility of the yellow metal could rise in
the near term because of uncertainties in other financial
markets. Still, gold should benefit from flight-to-quality
demand as the stock market lags.
Spot gold <XAU=> hit an intraday low of just over $870 an
ounce before rebounding to $881.90/882.60 by New York's last
quote at 2:15 p.m. EST (1915 GMT), up from $876.70/877.40 in
New York, on bargain hunting.
On Friday, Bush said he wanted to work with Congress on a
stimulus package that would focus on tax rebates for families
and incentives to encourage business investment. The White
House said the package could create about 500,000 new jobs.
[]
The dollar should be supported in the near term after the
Bush administration's stimulus package, a negative for gold,
market watchers said.
"The one thing about gold, in the short term, is that the
dollar may move in the trading-range pattern as opposed to the
straight-down pattern," said Bill O'Neill, managing partner of
LOGIC Advisors in Upper Saddle River, New Jersey.
O'Neill said gold could be on the defensive in the near
term in spite of solid long-term fundamentals.
"Gold is consolidating after touching recent highs," said
Christoph Eibl, head of trading at Tiberius Asset Management,
noting that there had been some investor selling of gold held
in exchange-traded funds (ETFs).
"ETF investors ... are holders rather than traders,
therefore the recent drop has some strength," he said.
The amount of gold held in New York-listed StreetTRACKS
Gold Shares <GLD.P> <XAUEXT-NYS-TT>, the world's largest
gold-backed ETF, hit a record on Jan. 15, but has since fallen
by around 20 tonnes to 629.83 tonnes.
A drop in physical buying from top gold buyer India has
also weighed on bullion, but bargain hunting should boost
prices in the near term, dealers said.
"We have seen a general slowdown in physical demand in
India. With the sharp decline in prices this week, we have seen
some beginnings of buying in India. So they certainly have used
the recent dip to pick up physical buying," said Andy Montano,
a director with bullion dealer ScotiaMocatta in Toronto.
Gold, which roared to a record high of $914 an ounce on
Monday, is expected to trade in a range of $870 to $900 an
ounce, with movements in the currency, energy and stock markets
likely to provide direction.
Gold's drop from the record high was partly driven by
selling from investors and funds to cover margin calls from
losses in stock markets amid fears of a recession in the United
States.
Gold's investment appeal was intact owing to
flight-to-quality demand on the back of turmoil in financial
markets as a result of a mortgage-related crisis and worries
about higher inflation.
"In fact, gold in many ways tends to be negatively
correlated to equity movements in general. When equities don't
perform so well, gold tends to do a little better, moving in
the opposite direction quite often," said Bart Melek, global
commodity strategist of BMO Capital Markets in Toronto.
All eyes were on a U.S. Federal Reserve meeting on interest
rates Jan. 29-30 after Chairman Ben Bernanke told a
congressional committee more rate cuts might be required as the
economic outlook worsened.
Platinum <XPT=> ticked up to $1,556/1561 from its previous
finish of $1,555/1,560 an ounce in New York. Palladium <XPD=>
dropped to $367/372 an ounce from its Thursday close of
$367/372.
Silver <XAG=> edged up to $16.14/16.19 an ounce from
$15.87/15.92 an ounce late in the U.S. market on Thursday.
(Additional reporting by Daniel Magnowski in London and Lewa
Pardomuan in Singapore; Editing by Christian Wiessner)
