* Gold may fall out of favour as industrial demand eyed
* SPDR Gold Trust holdings <XAUEXT-NYS-TT> unchanged
By Chikako Mogi
TOKYO, Aug 6 (Reuters) - Gold inched up on Thursday, drawing
support from the dollar's weakness against the euro and investor
risk appetite that has helped boost assets across markets, but
prices were capped as investors grew wary of high price levels.
Gold hit a two-month high earlier in the week on the dollar's
drop and a broad rally in commodities and equities, as hopes for
an economic recovery encouraged funds to pour money into a wide
range of assets.
Traders said investors may become cautious about pushing
prices higher given the elevated market levels, as well as
physical demand remaining weak and gold losing its appeal as a
safe haven as sentiment about the economy improves.
"We'll see further weakness in the dollar which is very
supportive to the gold market, but in 2009 we have seen gold
struggle to maintain its momentum when it got to the high
$900s-$1,000," said Toby Hassall, an analyst with CWA Global
Markets in Australia.
"I wouldn't be surprised if the market fails to break above
$1,000," he said.
Spot gold <XAU=> was up 0.2 percent at $963.60 per ounce as
of 0250 GMT, compared with New York's notional close of $961.95.
U.S. gold futures for December delivery <GCZ9> eased 0.1
percent to $965.40 an ounce, compared with $966.30 an ounce on
the COMEX division of the New York Mercantile Exchange.
As optimism about the economy grows, other products such as
silver, copper and oil have become a focus due to their
exposure to industrial use, Hassall said.
"As things are getting better and money flows into riskier
assets, funds are looking to get exposed to industrial demand.
Gold has been out of focus, with fear moving out of the market as
the volatility index <.VIX> fell," he said.
The dollar stayed near its 2009 lows against the euro on
Thursday on hopes a slower pace of U.S. private job losses in
July hinted at a gradual improvement in the economy. []
The impact on gold from the U.S. nonfarm payrolls data due on
Friday will depend on how currencies react, traders said. With
the recent markets' rally based on expectations the U.S. economy
is improving, a negative surprise could erode some of the
optimism.
Gold futures dipped on Wednesday as weaker equities prompted
funds to consolidate recent profits.
U.S. stocks slipped on Wednesday as the market took the
weaker services sector and private payrolls data as cooling
recent optimism the recession was retreating, but the market
finished off its lows as investors ventured into riskier
financial shares. []
Asian stocks fell on Thursday, led by a more than 3 percent
drop in Chinese stocks on worries about adjustments to monetary
policy that might impact market liquidity. []
Base metals also fell sharply on Thursday after rising to
multimonth peaks in previous sessions.
Physical demand is generally weak and the fairly high price
of gold in a historic context might limit the market impact from
an expected pick-up in Indian demand this month, traders said.
Indians have started buying gold jewellery and wholesalers
are stocking up against anticipated price rises as the busy
season gets under way in the world's largest bullion consumer.
India, accounting for over 20 percent of global demand for gold
jewellery in 2008, celebrates several Hindu festivals this month,
when demand for bullion usually picks up. []
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said holdings stood at 1,072.87 tonnes as
of Aug. 5, unchanged from the previous business day. []
PRICES
Precious metals prices at 0250 GMT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 962.55 0.60 +0.06 9.36
Spot Silver 14.60 -0.04 -0.27 28.98
Spot Platinum 1277.50 -5.00 -0.39 37.07
Spot Palladium 273.00 0.00 +0.00 47.97
TOCOM Gold 2950.00 -4.00 -0.14 14.65 24202
TOCOM Platinum 3906.00 33.00 +0.85 47.29 15256
TOCOM Silver 446.90 0.70 +0.16 39.96 84
TOCOM Palladium 842.00 -16.00 -1.86 53.09 182
Euro/Dollar 1.4390
Dollar/Yen 94.97
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Chris Gallagher)
