* Gold seen more appealing as dollar value questioned
* SPDR gold holdings drop over 1 pct as prices fall
By Chikako Mogi
TOKYO, Dec 9 (Reuters) - Gold edged off three-week lows on
Wednesday to trade around $1,134 an ounce as the dollar failed to
retain gains after earlier hitting a one-month high against a
basket of major currencies.
But bullion's rise was also tepid as investors, spooked by
credit woes in Greece and Dubai, looked to reduce risk exposure
and cut positions.
Traders and analysts said while both the dollar and gold are
regarded as safe-haven assets in times of trouble, gold currently
has more appeal due to a weak outlook for the dollar and
expectations of more central bank purchases of the metal.
"Investors are buying on weakness today, but the outlook
depends on how you expect the U.S. dollar to move in the medium
term," said Ben Westmore, a commodities economist at National
Australia Bank.
"Gold is more appealing because a lot of people are
questioning about the dollar," he said, adding that he expected a
further depreciation in the dollar because of the huge U.S.
budget deficit and low interest rates.
Spot gold <XAU=> rose 0.4 percent to $1,133.30 an ounce as of
0606 GMT, compared with New York's notional close of $1,129.30.
On Tuesday, spot gold fell as low as $1,125.15, the lowest since
Nov. 16. Bullion is off about 7 percent from a record high of
$1,226.10 hit last week.
U.S. gold futures for February delivery <GCG0> declined 0.8
percent to $1,134.40 an ounce from $1,143.40 on NYMEX. Futures
also hit a three-week low of $1,125.30 on Tuesday. Futures are
now about 7 percent below a record high of $1,227.50 touched last
week.
The market remained focused on central banks' interest in
gold. "A lot of banks are looking to diversify funds away from
the dollar," said Westmore.
Underlining that view, an official Chinese newspaper said on
Tuesday that China should increase the proportion of gold in its
foreign exchange reserves to ensure the safety of its overall
portfolio. []
One downside risk, however, is that current prices may be
seen as too high for new purchases by central banks, with China
expressing such concerns last week.
Gold prices are currently high and markets should be careful
of a potential asset bubble forming, a senior official at China's
central bank said last week, after prices for the precious metal
hit a record high. []
As market prices eased, holdings at the world's largest
gold-backed exchange-traded fund, SPDR Gold Trust <GLD>, fell to
1,116.247 tonnes as of Dec. 8, down 1.2 percent or 13.719 tonnes
from the previous business day.
It was the largest one-day drop in about five months. The
holdings hit a record high of 1,134.03 tonnes on June 1.
[]
The euro recovered against the dollar after hitting a
one-month low earlier in the day, pulling the dollar down against
a basket of six major currencies from a one-month high also hit
earlier. The dollar rose earlier as investors used the excuse of
concerns about rising sovereign debt troubles to unwind leveraged
carry trades ahead of the year end. []
PRICES
Precious metals prices at 0259 GMT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 1132.60 3.30 +0.29 28.68
Spot Silver 17.66 0.07 +0.40 56.01
Spot Platinum 1411.00 1.00 +0.07 51.39
Spot Palladium 365.00 -2.00 -0.54 97.83
TOCOM Gold 3229.00 -105.00 -3.15 25.50 104328
TOCOM Platinum 4025.00 -152.00 -3.64 51.77 15400
TOCOM Silver 504.90 -20.80 -3.96 58.13 786
TOCOM Palladium 1051.00 -32.00 -2.95 91.09 466
Euro/Dollar 1.4726
Dollar/Yen 88.36
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Risa Maeda; Editing by Michael Watson)
