* Dollar strengthens on flight to quality
* U.S. lawmakers reject bid $700 billion bailout plan
* Silver, platinum, palladium tumble as demand fears bite
(Updates throughout; adds detail, comment)
By Jan Harvey
LONDON, Sept 30 (Reuters) - Gold slipped by more than 2
percent on Tuesday as a firmer dollar and a calmer tone to
stocks encouraged profit-taking, while the other precious metals
tumbled in its wake.
Spot gold <XAU=> was quoted at $879.80/881.80 at 1344 GMT
against $903.25 an ounce at the nominal New York close on
Monday. Earlier, it touched a session low of $879.70.
"In a situation where the dollar is strengthening against
the euro, and the markets are calming down after yesterday's
tension, you will see an impact on the precious metals," said
Dresdner Kleinwort consultant Peter Fertig.
The dollar rose more than half a percent against the euro as
investors cut back on risky positions after a $700 billion
emergency plan to rescue the troubled U.S. financial sector was
rejected by Congress late on Monday. []
"Investors are starting to take their profits in the gold
market," said Deutsche Bank trader Michael Blumenroth. "They
don't want to leave it in any investment, they just want
dollars."
Safe haven assets such as treasury bills and gold soared on
Monday in the wake of the rejection of the plan, with the
precious metal rocketing nearly 5 percent to a two-month high of
$920 an ounce.
However gold failed to hold gains, with the traditional
safe-haven metal falling victim to selling pressure as investors
took profits. But despite this, analysts said gold was still
outperforming other assets.
"Gold was the only precious metal to hold up yesterday. All
the others were down," said Fertig. "All the metals with an
industrial use, like platinum, palladium and silver, fell."
LBMA SEES GOLD HIGHER
Investment demand appeared firm. The SPDR Gold Trust <GLD>,
the world's largest gold-backed exchange traded fund, saw an
inflow of nearly 30 tonnes on Monday, which took its holdings to
a record high of 752.2 tonnes. []
A poll of delegates to the London Bullion Market Association
annual conference in Kyoto showed they believe spot gold will
rise by about 6 percent to $958.60 by November 2009, while
platinum and palladium prices are expected to soar.
[]
The other precious metals also slipped sharply. Silver,
platinum and palladium have not benefited as gold has from
safe-haven buying. They have been battered by demand fears as
investors worry about the outlook for global growth.
Spot silver fell by nearly 5 percent to a session low of
$12.40, before recovering to trade at $12.41/12.49 an ounce,
against $13.07 at the nominal New York close on Monday.
The platinum group metals slipped sharply as investors
worried about the outlook for demand from carmakers, who are
major consumers of the metals for use in catalytic converters.
Platinum fell almost 9 percent to a session low of $983.50
an ounce, its weakest level since February 2006, while palladium
slipped to $194.50 an ounce, a new three-year low.
"Platinum is largely an industrial metal with its main
market being in autocatalysts," Fairfax analyst John Meyer said.
"Consequently, despite being a precious metal it does not
benefit in the same way as gold does during periods of weakening
economies."
Spot platinum <XPT=> was down at $983.50/1,003.50 from
$1,080 an ounce at the nominal New York close on Monday, while
palladium <XPD=> fell to $194.50/202.50 from $211.50.
(Reporting by Jan Harvey; editing by Karen Foster)
