* Gold set to continue correction after 11-mth high-analysts
* SPDR Gold ETF sees small inflow but offers little support
(Updates throughout, changes dateline - pvs TOKYO)
By Jan Harvey
LONDON, Feb 27 (Reuters) - Gold eased in Europe on Friday,
having touched a two-week low earlier in the session as traders
worried about slackening investment demand for the metal.
Spot gold <XAU=> edged down to $943.20/944.80 an ounce at
1013 GMT from $944.70 late in New York on Thursday. Earlier it
touched a low of $935.70 an ounce.
News that the U.S. government has reached an agreement to
substantially raise its stake in Citigroup <C.N>, a person
familiar with the matter said, offered a glimmer of hope for
greater stability in the financial system. []
This is allowing gold to continue its correction after last
week's highs. A dearth of fresh news to fuel upward momentum has
allowed the precious metal to slip more than $60 from the
11-month peak it hit a week ago, analysts said.
"The second quarter is not one of the strongest because
demand is relatively weak," said BNP Paribas analyst Michael
Widmer. "On top of that jewellery demand is being cleared off by
high prices and price volatility."
"There is a lot of slack that the investors have to pick up,
and given the inflows into ETFs are slowing down a little bit, I
am not sure that the investors are picking up the slack at the
moment," he added.
Strong inflows into gold-backed exchange-traded funds
fuelled by fears over the stability of the financial sector and
the inflation outlook pushed prices above $1,000 an ounce last
Friday. However, these flows have since stalled.
Holdings of the world's largest gold ETF, New York's SPDR
Gold Trust <GLD>, were static for much of the week, recording
only a small 0.31-tonne inflow on Thursday. []
"This is not going to be enough to support sentiment in the
gold market, which has now corrected by about 6 percent from its
recent highs," said UBS strategist John Reade in a note.
"(It) will probably continue to decline, at least while the
performance of equities and other risk assets remains less
dreadful than of late," he added.
LACKLUSTRE
As investment flows stall, the lack of buying in the
jewellery sector -- which accounted for 58 percent of global
demand last year, according to the World Gold Council -- is
weighing on prices.
Jewellery demand in India, the world's biggest bullion
market, is lacklustre as buyers await lower prices in the midst
of the wedding season, with a weak rupee making imported gold
expensive.
"There are enquiries but no buyers," said Pinakin Vyaas,
chief manager-treasury with IndusInd Bank in Mumbai. "As the
rupee has depreciated so heavily, the costing is getting
affected." []
India has not imported any gold in February as recent record
prices dampened demand. In the same month last year it imported
23 tonnes of the metal. []
Meanwhile gold inventories monitored by the Shanghai Futures
Exchange meanwhile fell by 27 kg in the week ended Thursday, to
just 6 kg. []
Among the external drivers of gold, the dollar rallied
sharply, also weighing on the precious metal, while oil prices
eased nearly 2 percent after posting sharp gains in the previous
session as investors worried about the outlook for demand.
[] []
Among other precious metals, spot silver <XAG=> was at
$13.11/13.18 an ounce from $13.10.
Spot platinum <XPT=> was little changed at
$1,056.50/1,066.50 an ounce from $1,050, while spot palladium
<XPD=> was steady at $194.50/198.50 an ounce from $194.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
