* Physical demand still expected to support market
* SPDR Gold holdings <XAUEXT-NYS-TT> steady
By Chikako Mogi
TOKYO, July 8 (Reuters) - Gold prices fell on Wednesday as
the dollar remained firm, sapping gold's appeal as an
alternative investment, and on easing inflation fears as oil
prices weakened.
Gold has been hurt by the dollar's strength as investors
have recently preferred the U.S. currency to bullion as a safe
store of value amid fears over the economic outlook.
Declining oil prices on growing uncertainty over an
economic recovery later in the year eased worries about
inflation, hurting gold which is widely perceived as a hedge
against rising prices.
But traders expected buying from major consumers including
India and other Asian countries to resume when prices fall
further, limiting the market's downside.
"At the moment, gold prices have been driven heavily by the
movement in the U.S. dollar, but if we get down towards $900,
we might see some opportunistic buying," said David Moore, a
commodities analyst at teh Commonwealth Bank of Australia.
"Fabrication demand for gold has been relatively weak, but
there is an element of price sensitivity too, and demand for
gold is likely to strengthen if gold prices fall," he said.
Spot gold <XAU=> had fallen 0.3 percent to a low of $920.60
an ounce earlier before trading at $922.80 per ounce at 0240
GMT, down 0.1 percent from New York's notional close of
$923.30.
U.S. gold futures for August delivery <GCQ9> fell 0.6
percent to $923.10 an ounce, compared with $929.10 an ounce on
the COMEX division of the New York Mercantile Exchange.
The dollar and yen held onto gains on Wednesday, after
rising broadly the previous day as uncertainty about the global
economic outlook and forthcoming U.S. corporate earnings
increased the safe-haven appeal of both currencies. []
The market was eyeing comments on the dollar's role as the
global reserve currency at the Group of Eight leaders' meeting
starting on Wednesday. [] []
Oil fell towards $62 on Wednesday, on course for its sixth
consecutive fall and longest losing streak since mid-December,
after data showed larger-than-expected builds in U.S. products
stocks, reflecting little sign of a recovery in oil demand.
[]
Traders said they were watching if gold prices fall below
$910-$915, a recent low in the downtrend which began in early
June when the market failed to hit the $1,000 last touched in
February.
Investment in the world's largest gold-backed
exchange-traded fund, the SPDR Gold Trust <GLD>, remained
stagnant, with its holdings unchanged from the previous
business day rat 1,120.19 tonnes as of July 7. []
Wakako Harada, senior trader at Mitsubishi Corp in Tokyo,
said gold was unlikely to extend sharp losses given growing
doubts about an optimistic outlook of the global economy for
the second half of 2009.
"I don't sense that money is leaving gold in a major way,"
she said.
Gold's relative strength index (RSI), a measure of whether
the metal is overbought or oversold, stood at 43.6. The market
views an RSI of 30 or less as oversold and 70 or more as
overbought.
In other precious metals, platinum extended losses as the
market is in a downward technical trend after failing to keep
prices above $1,200. Platinum <XPT=> was at $1,111.00 an ounce,
down 2 percent.
Precious metals prices at 0257
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 923.05 -0.25 -0.03 4.87
Spot Silver 13.05 -0.05 -0.38 15.28
Spot Platinum 1111.00 -21.00 -1.86 19.21
Spot Palladium 237.00 -2.00 -0.84 28.46
TOCOM Gold 2817.00 -22.00 -0.77 9.48
26892
TOCOM Platinum 3393.00 -126.00 -3.58 27.94
13343
TOCOM Silver 397.90 -7.30 -1.80 24.62
152
TOCOM Palladium 729.00 -14.00 -1.88 32.55
270
Euro/Dollar 1.3904
Dollar/Yen 94.61
(Editing by Ben Tan)
