* Gold falls to two-week low as risk appetite recovers
* Inflation fears recede following Obama's budget
* IMF: no change in plans to sell 400 tonnes of gold
(Recasts, updates with quotes, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Pratima Desai
NEW YORK/LONDON, Feb 26 (Reuters) - Gold prices fell to a
two-week low on Thursday after U.S. President Barack Obama's
budget offered a rosier outlook for the economy and quelled
fears about longer-term inflation.
"Gold was down on an increase in investor risk tolerance,
and that's partly attributed to the (U.S.) budget, which shows
that the outlook for inflation was down for the United States,"
said James Steel, chief commodities analyst at HSBC bank.
Spot gold <XAU=> fell to $930.80 an ounce, the weakest
price since Feb. 11. It declined for fourth session in a row,
after rising to an 11-month high above $1,000 last Friday.
Bullion was at $939.60 an ounce at 2:29 p.m. EST (1929
GMT), down 1.3 percent against its last quote of $952.10 in New
York late on Wednesday.
Gold for April delivery <GCJ9> settled down $23.60, or 2.4
percent, at $942.60 an ounce on the COMEX division of the New
York Mercantile Exchange.
With the $787 billion U.S. economic stimulus package
pouring money into the struggling economy, Obama's first
forecast since taking office predicted that the economy will
shrink 1.2 percent in 2009, before growing by 3.2 percent in
2010. []
Bullion dropped to its lowest level in nearly two weeks,
but analysts said the retreat could prompt further buying by
investors seeking a safe place to park their assets.
"It's had such a strong run. It seems to have run out of
steam," Fairfax analyst Marc Elliott said.
Investors have been piling into gold since October as the
financial crisis escalated after the collapse of Lehman
Brothers investment bank.
Fears that the massive amounts of money being pumped into
the global economy by central banks and governments will
eventually result in spiraling inflation have been another
reason for investors to buy gold.
MOMENTUM NEEDED
Last Friday gold's high of $1,005.40 an ounce was not far
from the record high of $1,030.80 an ounce hit last March.
Prices have been boosted by buying for exchange traded
gold-backed funds, the biggest of which is the SPDR Gold Trust
<GLD>. SPDR's holdings hit a record above 1,028 tonnes last
week, but since then have remain unchanged.
"We've seen the flows into physically backed ETFs come to a
standstill over the past few sessions, and in turn prices are
easing, as they are not able to draw the same support from
investment demand," Barclays Capital analyst Suki Cooper said.
International Monetary Fund officials said there was no
change in already agreed plans to sell just over 400 tonnes of
the IMF's gold to create an endowment to finance future
operations. []
Spot silver <XAG=> fell more than 5 percent to a three-week
low of $12.97 an ounce. It was later at $13.00 an ounce, down
5.0 percent from its Wednesday finish of $13.69.
Platinum <XPT=>, also a precious industrial metal, was at
$1,046 an ounce, up 0.2 percent from its close of $1,044 on
Wednesday. The metal, used in autocatalysts to clean car
emissions, has been battered alongside auto sales.
Palladium <XPD=> was at $193.00, down 1.3 percent from its
late Wednesday New York quote of $195.50.
(Additional reporting by Rebekah Curtis; Editing by Walter
Bagley)
