* China bank reserve move helps dollar
* Analysts eye interest-rate outlook
* Launch of new U.S. ETFs fuels investment interest in PGMs
(Updates prices)
By Jan Harvey
LONDON, Jan 12 (Reuters) - Gold and platinum prices turned
negative in Europe on Tuesday after China gave a strong signal
that it may be close to raising interest rates, denting the
appeal of non-interest bearing assets like precious metals.
Platinum and palladium prices jumped to their highest since
mid-2008 earlier on Tuesday as the launch of new investment
products in the United States and hopes for a recovery in
industrial demand fuelled buying.
Spot platinum <XPT=> hit a peak of $1,624 an ounce, its
highest since August 2008, but eased to $1,582.50 an ounce at
around 1430 GMT, against $1,591.50 late in New York on Monday.
Palladium hit an 18-month high of $439 an ounce and was
later at $430 against $431. Spot gold <XAU=> fell to a session
low of $1,144.00 an ounce, and was later at $1,147.85 versus
$1,151.10.
"The market got a bit scared after China tightened its
liquidity. We saw the euro falling, equity markets slipped and
that triggered a bout of selling in gold," Standard Bank analyst
Walter de Wet said.
"But overall the support remains...at the $1,142 level," he
added. "I believe we'll push higher again."
China's central bank said it was raising banks' reserve
requirements by 0.5 percentage points from Jan. 18, in the
clearest sign yet that it has begun to tighten monetary policy.
[]
The move pushed the euro lower against the dollar. Strength
in the U.S. unit curbs gold's appeal as an alternative asset and
makes dollar-priced commodities more expensive for holders of
other currencies.
The move on China's part, which analysts say is a response
to concerns parts of the economy may be overheating, suggests
that policymakers there are focussing on inflation.
A rise in interest rates, while seen by few as imminent, is
nonetheless "the next natural move", according to one analyst.
Gold often acts as a hedge against inflation for some
investors, but at the same time its lack of yield makes it
unattractive in an environment of rising interest rates.
INTEREST RATES
"Gold doesn't like real interest-rate environments which are
very high and positive because it is a non-interest bearing
asset," said Michael Lewis, head of commodities research at
Deutsche Bank.
"It has a much better chance for competing for investment
inflows in low or negative real interest-rate environments."
Platinum and palladium prices are still drawing support
from the launch of the first U.S.-based platinum and palladium
exchange-traded funds, which began trading on the NYSE Arca
platform on Friday.
"We have a new player on the market, and that is the new
palladium and platinum ETFs being traded in the United States,"
said Commerzbank analyst Eugen Weinberg. "We have seen strong
demand for them in the first two days of trading."
"Chinese car sales data also supported platinum and
palladium prices, because it was so strong," he added. "But I
think really demand at the moment is coming not so much from
industry but from the investment side."
More than half of global platinum and palladium demand comes
from carmakers, which use the metals in autocatalysts. Car
demand figures are therefore closely watched by PGM traders.
For a graphic showing the relationship of platinum and
palladium prices to car sales, click on:
http://graphics.thomsonreuters.com/0110/CMD_PLDPLT0110.gif.
China's auto sales surged past those of the United States to
reach record levels last year on government incentives, and are
poised for solid but slower growth in 2010. []
Analysts say investment buying sparked by expectations for a
recovery in car demand in 2010 could lead platinum and palladium
to outperform other precious metals this year. []
Silver <XAG=> was at $18.45 an ounce against $18.55.
(Additional reporting by Humeyra Pamuk; Editing by Sue
Thomas)
