* Gold rises above $970 on weak dollar, hits 2-month high
* PGMs up sharply on follow-through from car sales data
* Funds bullish on commodities, equities alike
(Recasts, updates prices, market activity to New York close;
adds new byline, dateline, previously LONDON)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 4 (Reuters) - Gold futures rose above
$970 an ounce on Tuesday, scaling a two-month high on the back
of dollar weakness and growing investor risk appetite, but the
metal could retreat as it neared the $1,000 level.
Platinum group metals also rose sharply, boosted by
better-than-expected auto sales as Americans rushed to take
advantage of the government's stimulus plan to scrap their old
cars and buy new ones.
"It is a combination of dollar weakness and a rise in
investment risk appetite, which is shifting capital out of the
bond market and into equities. Basically, it is undermining the
dollar and allowing gold to rally," said James Steel, chief
commodities analyst at HSBC in New York.
"In general, hedge funds are bullish," he said.
Renewed interest from investment funds buoyed commodities
and equities alike, as the market focused on economic recovery
rather than deflation, which had decreased inflation-hedge
buying in gold earlier this year.
U.S. December gold futures <GCZ9> settled up $10.90, or 1.1
percent, at $969.70 an ounce on the COMEX division of the New
York Mercantile Exchange.
Spot gold <XAU=> at $964.10 an ounce at 2:28 p.m. EDT (1828
GMT), against $955.55 an ounce late in New York on Monday.
Gold prices came under pressure in earlier trade as the
U.S. dollar edged up against the euro <EUR=>, with falling
equities prompting profit taking in currencies seen as riskier.
[].
But the currency pared those gains later in the session
after data showed sales of previously owned U.S. homes rose at
a faster-than-expected rate in June. []
Dollar weakness tends to boost investor appetite for hard
assets such as gold, as well as making the precious metal
cheaper for holders of other currencies.
WEAK DEMAND
However, given weak underlying demand for gold and strong
technical pressure, prices were likely to experience heavy
pressure near the $1,000 level, analysts said.
"The trend that we've seen from the highs established this
year is going to create some pretty serious resistance around
the $980 area," Saxo Bank senior manager Ole Hansen said.
Gold prices had risen toward $1,000 several times in the
past 18 months, and each time met heavy selling near the
psychologically important level.
Inflows into gold-backed exchange-traded funds were weak
last month, with holdings of the largest, New York's SPDR Gold
Trust <GLD>, easing 4 percent. []
Among other precious metals, platinum <XPT=> was at $1,260
an ounce against $1,232.50, while palladium <XPD=> scaled a
11-month high at $277.50, and was last at $275 against its
previous finish of $269.50.
Silver <XAG=> was at $14.59 an ounce against $14.21.
Platinum and palladium rallied on follow-through buying on
Monday's news that auto sales jumped as Americans took
advantage of the highly popular "Cash for Clunkers" program.
[]
The United States is primarily a market for gasoline cars,
which use a higher proportion of palladium than platinum in
their catalytic converters.
(Additional reporting by Catherine Bosley in London; Editing
by Lisa Shumaker)
