* Gold falls on expectations of a resurgent dollar
* Oil falls about 3 pct to $70/bbl, pressuring gold
* SPDR gold ETF records biggest one-day outflow since July
(Recasts, updates market activity, adds comments, closing
prices, changes dateline, previously LONDON)
By Frank Tang
NEW YORK, Dec 9 (Reuters) - Gold hit its lowest level in
more than three weeks on Wednesday, falling sharply for a
fourth-straight session as expectations of a dollar bounce and
easing inflation sent bullion investors racing to cut
positions.
Analysts said that the gold market foreshadowed an imminent
rise in the dollar against the euro and major currencies,
driven by worries over sovereign debt in Spain and Greece.
"We are seeing liquidation from a lot of fast money that
had jumped into gold on the premise that they want to diversify
away from U.S. dollar-based assets," said Adam Klopfenstein,
senior market strategist at Lind-Waldock.
Increasing uncertainty about the nascent economic recovery
also dampened gold's appeal as a hedge against inflation, he
said.
Spot gold <XAU=> was at $1,122.45 an ounce at 2:27 p.m. EST
(1927 GMT) against $1,129.30 late on Tuesday. The metal hit a
low of $1,117.60 an ounce, the weakest since Nov. 13.
U.S. February <GCG0> gold futures settled down $22.50, or 2
percent, at $1,120.90 an ounce on the COMEX division of the
NYMEX.
Bullion is now trading about $100 an ounce below the record
high $1,226.10 reached on Dec. 3.
Dealers said that a correction was long due after gold's
strong rally. The metal was still 28 percent higher year to
date.
"I would sum this up as a reality check for the gold
market," said Tom Kendall, precious metals strategist at
Mitsubishi. "We have seen a number of disappointments over the
last few days in terms of economic data -- Japanese GDP, German
industrial production -- and a drop in SPDR holdings"
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings fell 13.719 tonnes to
1,116.247 tonnes on Tuesday, their biggest one-day drop since
mid-July. []
The SPDR gold ETF is the world's sixth largest bullion
holder, according to World Gold Council data dated September,
ahead of China, Japan and Switzerland.
Simon Weeks, head of precious metals at the Bank of Nova
Scotia, said while gold had found support, its correction may
have further to run.
"With the ETFs losing 15 tonnes yesterday, there is
definitely some liquidation around at the moment.
"For the time being, we definitely need to have this
correction, and we'll probably extend down to $1,068-1,070
before it is complete," he added.
Gold's decline has been intensified by many fund and
institutional players unwinding positions ahead of year end,
even as some individual investors were looking for bargains at
lower prices.
OIL FALLS SHARPLY
The dollar cut its initial losses against the euro,
triggering selling in gold from earlier in the session.
Weakness in the dollar boosts gold's appeal as an
alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies.
Oil prices tumbled 3 percent to $70 a barrel after
government data showed larger-than-expected build in U.S.
refined products. []
Gold tends to track crude prices, as the metal can be
bought as a hedge against oil-led inflation.
For a graphic on gold's relationship with inflation:
http://graphics.thomsonreuters.com/129/GLD_TPSS1209.gif
Among other precious metals, silver <XAG=> was at $17.29 an
ounce against $17.59, platinum <XPT=> was at $1,419.50 an ounce
against $1,410 and palladium <XPD=> at $362.50 against $367.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCG0> 1143.40 -20.6 -1.8 884.3 29.3
US silver <SIH0> 17.807 -0.553 -3.0 11.295 57.7
US platinum <PLF0> 1440.40 -4.20 -0.3 941.50 53.0
US palladium <PAH0> 375.35 0.10 0.0 188.70 98.9
Prices at 3:42 p.m. EST (2042 GMT)
Gold <XAU=> 1129.05 -27.85 -2.4 878.20 28.6
Silver <XAG=> 17.61 -0.55 -3.0 11.30 55.8
Platinum <XPT=> 1411.50 -27.00 -1.9 924.50 52.7
Palladium <XPD=> 364.50 -6.500 -1.8 184.50 97.6
Gold Fix <XAUFIX=> 1146.75 -17.50 -1.5 836.50 37.1
Silver Fix <XAGFIX=> 18.11 7.00 0.4 14.76 22.7
Platinum Fix <XPTFIX=> 1439.00 16.00 1.1 1529 -5.9
Palladium Fix<XPDFIX=> 374.00 3.00 0.8 365.0 2.5
(Additional reporting by Jan Harvey in London; Editing by
Christian Wiessner)
