* Dollar firms as risk aversion cranks up
* Equities slide on fears flu pandemic could hit economy
(Adds comment, updates prices)
By Jan Harvey
LONDON, April 27 (Reuters) - Gold slipped on Monday as the
firmer dollar prompted investors to cash in gains from its
earlier rise to a four-week high, boosted by a fall in stock
markets on concern over the possibility of a flu pandemic.
The precious metal has been underpinned by technical factors
after breaking above $900 an ounce last week, and has been
lifted by news China has sharply increased its gold reserves.
But gold's failure to break upwards through a level of
resistance, seen by analysts of past price movements at $918.50
an ounce, also contributed to the change of direction.
Spot gold <XAU=> was bid at $907.60 an ounce at 1251 GMT,
against $911.10 an ounce late in New York on Friday. Earlier it
touched a high of $918.25.
"It looks like we are seeing some profit taking after gold's
rally up," said Commerzbank senior trader Michael Kempinski. He
said initial anxieties over the news of an outbreak of swine flu
had been behind gold's early push higher.
The precious metal climbed 2.5 percent to Monday's high from
the middle of last week, boosted by news that China had
increased its gold holdings by three-quarters since 2003, and
later amid fears the swine flu outbreak could knock the economy.
World stocks tumbled on Monday after seven weeks of gains,
while oil and the euro fell as concerns over the virus grew.
[]
Saxo Bank senior manager Ole Hansen said traders would be
watching how the wider markets react to the prospect of a flu
outbreak.
"If there is some worry that this will prolong the slump, or
will increase the difficulties of the economy returning to some
kind of shape...that might have an impact on gold," he said.
On the foreign exchange markets, the euro dropped versus the
dollar. A stronger dollar typically weighs on gold, which is
often bought as an alternative asset to the currency. []
Gold broke through $900 late last week and was boosted on
Friday by news that China has lifted its gold reserves by three
quarters to 1,054 tonnes, against 600 tonnes at the time of its
last report in 2003.
"The possibility that China might will increase its official
sector gold holdings further is potentially supportive of
prices," HSBC said in a research note.
GOLD BUYING
Elsewhere Dubai's gold imports in the first quarter of the
year grew 15 percent from a year earlier, according to the Dubai
World Group. However, gold sales there fell 40-60 percent in the
first quarter compared with the final quarter of 2008.
[]
Meanwhile gold buying in the world's biggest gold consumer,
India, rose ahead of the wedding season there but remains
sharply down year-on-year as high prices and the economic
slowdown dents consumers' interest in jewellery. []
Demand for gold-backed exchange traded funds also remained
stagnant. The largest gold ETF, the SPDR Gold Trust, said its
holdings were unchanged on Friday from a day before. []
Among other precious metals, spot platinum <XPT=> was bid at
$1,148 an ounce against $1,173.50, while spot palladium <XPD=>
was bid at $225.50 an ounce against $231.
Platinum and palladium, like other industrial metals, are
suffering from fears a swine flu pandemic could hurt demand.
"At the moment commodities are highly correlated to
equities," said one trader, saying a decline in equities were
likely to pressure commodities lower.
"(There is) also fear in the market that swine flu may
affect the economy."
Silver <XAG=> was bid at $12.94 an ounce against $12.84. The
metal rose 3 percent to a near four-week high of $13.20 earlier,
but is vulnerable to a correction in gold, analysts said.
(Reporting by Jan Harvey; Editing by Anthony Barker)
