(Adds activity in physical market)
By Lewa Pardomuan
SINGAPORE, Jan 17 (Reuters) - Gold extended losses from a
record high on Thursday, surrendering as much as $8.60 an ounce
as the dollar held onto its gains against the euro ahead of a
testimony by U.S. Federal Reserve Chairman Ben Bernanke.
Gold's price drop stirred up trade in the physical sector,
with dealers noting purchases from jewellers in Indonesia,
Thailand, Vietnam and also India, the world's largest gold
consumer.
Spot gold <XAU=> fell to $878.50/879.50 an ounce from
$885.60/886.30 late in New York on Wednesday, when it dropped
more than 1 percent as funds liquidated positions to cover
margin calls from losses in stock markets.
"That's really a reflection of possibly people's
expectations of some weakness in the economy to come as a
result of the U.S. On top of that, some profit taking is taking
some buyers off the table to pay for margin calls," said Darren
Heathcote of Investec Australia in Sydney.
He said recession fears would pressure prices of the
precious metal but "the recent move has been reinfluenced
significantly need to cover margin calls."
Gold hit a record high at $914 an ounce on Monday on
expectations of a sharp cut in U.S. interest rates and turmoil
in the financial markets triggered by a mortgage-related
crisis.
Tokyo shares <> rose more than 1 percent on Thursday,
bouncing back from two-year lows as a firmer dollar helped ease
exporters' fears about a potential recession in the United
States, the region's top overseas market. []
"I believe there is a very good chance that we'll see gold
recover, providing the stock market, particularly the U.S.
stock market stabilises," said Heathcote of Investec.
He pegged support at $875 and $877, with resistance at
$900.
The euro hardly changed at $1.4660 <EUR=>, holding near a
two-week low of $1.4594 hit on electronic trading platform EBS
on Wednesday, after comments from a European Central Bank
official fuelled fears that U.S. economic weakness may be
spreading to Europe. []
Investors will scrutinise Fed Chairman Bernanke's words
later in the day for clues on how much the U.S. central bank is
poised to cut interest rates later this month.
Many dealers have priced in expectations for at least a
half-percentage-point interest rate cut by the Fed at its next
regular policy meeting on Jan. 29-30 to stimulate the sagging
economy.
"The small specs are still a bit on a short side. Just a
bit. They might be selling at the lower range right now," said
William Kwan at Phillip Futures in Singapore.
"It's a healthy correction. It makes gold cheaper for
investors to purchase," he said.
PHYSICAL BUYING
The key gold futures contract for December 2008 delivery
<0#JAU:> on the Tokyo Commodity Exchange (TOCOM) was 3 yen per
gram higher at 3,051 yen in a technical rebound after falling
by the daily 120 yen limit on Wednesday.
"There's physical buying this morning and India also
re-emerged. Physical buyers came back to the market before
TOCOM opened but premiums are still the same," said a dealer in
Singapore.
Gold bars were on par with the spot London prices in
Singapore, unchanged from last week <GOLD/ASIA1>.
COMEX gold futures extended losses, with the most active
February contract <GCG8> falling $1.7 an ounce to $880.3 an
ounce.
Goldman Sachs raised its 2008 gold price forecast to $915
per ounce from $800, factoring in an expected U.S. recession in
the second and third quarters that would lead to a weaker
dollar. []
Platinum <XPT=> fell to $1,549.50/1,554.50 an ounce from
$1,559/1,564 an ounce late in New York.
Silver <XAG=> dipped to $15.79/15.84 an ounce from
$15.84/15.89 an ounce. Palladium <XPD=> dropped to $369/374 an
ounce from $371/375.
Precious metals prices at 0433 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 878.50 1.30 +0.15 5.50
Spot Silver 15.79 0.01 +0.06 6.91
Spot Platinum 1551.50 -7.50 -0.48 2.07
Spot Palladium 369.50 -1.50 -0.40 0.41
TOCOM Gold 3050.00 2.00 +0.07 -0.33
56963
TOCOM Platinum 5219.00 -32.00 -0.61 -2.25
23283
TOCOM Silver 547.40 -2.40 -0.44 1.18
981
TOCOM Palladium 1294.00 -8.00 -0.61 -4.22
914
Euro/Dollar 1.4651
Dollar/Yen 106.94
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Valerie Lee)
