* Gold ends flat as dollar keeps rising
* Oil-led inflation concerns limit losses
* Bullion in downward trend after peaking last week
(Recasts, updates with quotes, closing prices, changes
dateline, prev. LONDON)
By Frank Tang
NEW YORK, June 10 (Reuters) - Gold futures erased initial
gains to finish flat on Wednesday, as a dollar bounce and signs
of lagging physical jewelry demand prompted investors to take
profits.
A rally in oil prices, which surged to a seven-month high
above $71 per barrel, limited bullion's losses because of the
metal's appeal as an insurance against purchasing power erosion
brought by potential inflation.
"Given the fact that we are on a downward trend after
peaking at $990 last week, I would not be surprised to see gold
head lower, especially if the dollar continued to appreciate,"
said Carlos Sanchez, precious metals analyst at CPM Group.
Gold rose toward $1,000 an ounce last week as a weakening
dollar combined with better economic sentiment boosted
investment buying. However, a sharp rally of the U.S. currency
following an optimistic jobs report last Friday put a damper on
gold's rise.
U.S. August futures <GCQ9> settled unchanged at $954.70 an
ounce on the COMEX division of the New York Mercantile
Exchange.
Spot gold <XAU=> was at 952.10 an ounce at 2:18 p.m. EDT
(1818 GMT), against its previous finish of $953.75.
Earlier in the session, the metal traded as high as $965.25
an ounce as the dollar was initially pressured by news that
Russia planned to cut the proportion of U.S. Treasuries in its
$400-billion reserves. []
Investors usually view gold as an insurance against the
falling value of their dollar-denominated portfolios. The
inverse relationship between gold and the dollar broke down
early this year as both assets benefited from a flight to
quality.
Much thinner jewelry demand from a price-sensitive physical
market in top gold buyer India also weighed on prices, Sanchez
said. He said that gold could find support at lower prices
between $920 and $930 an ounce.
Bombay Bullion Association said India imported 17.8 tonnes
of gold in May, down 39 percent from a year ago.
[]
However, recent strength in crude prices was seen as a
reflection of potential inflation, supporting gold's status as
a hedge against that.
Oil prices settled up 2 percent above $71 per barrel,
boosted by a larger-than-expected fall in crude stocks and a
forecast that falling demand could be bottoming out. []
GOLD DE-HEDGING FALLS
Slowing of miners buying back their money-losing hedges
also took a toll on sentiment in the gold market.
The rate at which gold miners cut their hedging positions
slowed in the first quarter of 2009 to 110,000 ounces, the
lowest level of net de-hedging seen since 2003, metals
consultancy GFMS said in a report on Wednesday.
Hedging allows producers to lock in prices for future
output, but it can backfire if metals prices rise above the
hedged price. Buying back of outstanding hedge positions has
been an important element of demand in past years
[].
Among other precious metals, silver <XAG=> fell to $15.11
an ounce against $15.21. Platinum <XPT=> rose to $1,261.00 an
ounce against $1,247, while palladium <XPD=> firmed to $254.50
against $252.50.
Investment interest in platinum remained buoyant amid
uncertain auto-sector demand. ETF Securities reported a fresh
11,000-ounce inflow into its ETFS Physical Platinum fund on
Tuesday, meaning its holdings are now up 15 percent
week-on-week. []
Close Change Pct 2008 YTD
Chg Close Pct Chg
US gold <GCQ9> 954.70 0.00 0.0 884.30 8.0
US silver <SIN9> 15.225 0.085 0.6 11.295 34.8
US platinum <PLN9> 1273.20 15.30 1.2 941.50 35.2
US palladium <PAU9> 258.75 1.70 0.7 188.70 37.1
Prices at 2:18 p.m. EDT (1818 GMT)
Gold <XAU=> 952.10 -1.65 -0.2 878.200 8.4
Silver <XAG=> 15.11 -0.10 -0.7 11.30 33.7
Platinum <XPT=> 1261.00 14.00 1.1 924.50 36.4
Palladium <XPD=> 254.50 2.00 0.8 184.50 37.9
Gold Fix <XAUFIX=> 953.75 -2.25 -0.2 836.50 14.0
Silver Fix <XAGFIX=> 15.390 0.460 3.1 14.760 4.3
Platinum Fix <XPTFIX=> 1267.00 0.00 0.0 1529.00 -17.1
Palladium Fix <XPDFIX=> 261.50 0.00 0.0 365.00 -28.4
-------------------------------------------------------------
Prices in dollars per ounce.
2008 close for U.S. gold second contract month, U.S. silver and
palladium third contract months and U.S. platinum fourth
contract month.
(Additional reporting by Kylie Maclellan and Jan Harvey;
Editing by Christian Wiessner)
