* Gold steady above $940; ETF holdings ease
* Dollar cuts gains vs basket of currencies <.DXY>
* Analysts eye corrective move lower for bullion
(adds quotes, updates prices)
By Nick Vinocur
LONDON, June 29 (Reuters) - Gold rose above $942 per ounce
on Monday, strengthening as the dollar turned lower
against six major currencies with slight caution toward riskier
assets also proving supportive.
Gold <XAU=> was at $941.75 per ounce at 1256 GMT, up from
$938.05 quoted late in New York on Friday. The precious metal
earlier hit an intra-day high at $942.50 but is some way off a
two week high of $948.20 hit last Friday.
A cautious approach to risk kept global stock market gains
in check, while crude <CLc1> held under $70 per barrel following
a bearish report on demand from the IEA, sapping gold's appeal
as a hedge against oil-induced inflation.
Analysts said the precious metal was holding onto gains but
lacking upward momentum as currency markets would be indecisive
until U.S. non-farm payroll data was released on Thursday.
"The dollar is going to be critical, and as long as it
continues to weaken that tends to mean that gold will slowly
grind higher," said Dan Smith, an analyst at Standard Bank.
"We're looking at more risk averse behaviour in coming
weeks, which we think will push gold higher," he added.
DOLLAR STEADIES
The dollar slipped after data from the Chicago Federal
Reserve showed U.S. economic activity remained extremely weak in
May, consistent with a continuing recession. []
The currency was under pressure last week following Chinese
calls for a super-sovereign global reserve currency.
[]
But the case for a dollar alternative was undermined on
Monday when the central bank governor of the United Arab
Emirates told Reuters that the prospect was difficult to
contemplate and plans to replace the dollar would not succeed.
[]
U.S. gold futures for August delivery <GCQ9> strengthened to
$941.90 per ounce, up 0.7 percent on the day.
Analysts also said the precious metal could be due for a
slight correction following last week's rally.
"The price of crude oil is still below $70 per barrel, and
that (crude) has been a key driver of inflation fears and also
the gold price," said Jesper Dannesboe, an analyst at Societe
Generale.
"We had the correction from $1,000 down to around $910, and
then another correction upwards. Now I think we're heading down
again," he added.
Reflecting concern that gold may have lost some of its
appeal to investors, the world's largest gold-backed
exchange-traded fund, the SPDR Gold Trust <GLD>, said its
holdings remained at 1,125.74 tonnes as of June 26, when it fell
0.5 percent. []
It is currently down 0.7 percent from a record volume of
1,134.03 tonnes, marked on June 1.
Further undermining physical demand, ETF Securities said the
amount of gold it holds to back its Gold Bullion Securities
exchange-traded commodity fund had declined 567 ounces on June
26. []
Noncommercial net long U.S. gold futures positions fell 5.3
percent to 166,294 lots in the week to June 23 from 175,543 lots,
a weekly report by the U.S. Commodity Futures Trading Commission
showed. []
In other precious metals markets, spot silver <XAG=> eased
to $13.96 quoted late in New York on Friday, while platinum
<XPT=> dropped to $1,185.50 and palladium <XPD=> rose slightly
to $245.50.
(Reporting by Nick Vinocur, additional reporting by Miho
Yoshikawa; Editing by Veronica Brown)
