* Platinum ETF launch effect offset by stronger dollar
* SPDR Gold holdings inch down 0.08 pct
* CDS risk for euro, commodities highlighted
(Updates prices)
By Veronica Brown
LONDON, Jan 20 (Reuters) - Platinum prices retreated on
Wednesday, falling from earlier 17-month highs of $1,654, with
positive sentiment from the recent launch of new exchange-traded
funds overrun by a resurgent dollar.
Gold prices also buckled, pressured by unfavourable currency
fundamentals, dropping 1.5 percent to below $1,120.
The U.S. currency hit five-month highs against the euro
<EUR=> and its highest in a month versus a basket of major
currencies after the government reported U.S. housing starts
fell unexpectedly in December, while producer prices rose last
month.[] []
Spot platinum <XPT=> rose as high as $1,654, a level last
seen in August 2008, but the dollar's strength pulled prices
back to $1,624.50 by 1449 GMT, down from $1,643 quoted late in
New York on Tuesday. It earlier hit an intraday low at $1,612.
A U.S. subsidiary of London's ETF Securities launched
platinum and palladium exchange-traded funds earlier this month,
and both metals had climbed since then.
Even though the market experienced fairly hefty losses on
Wednesday, some analysts were still positive about the outlook
for platinum group metals (PGMs).
"We still see decent support for platinum and we can't see
anything that should see massive selling. Mainly it's the ETFs
but also from possible supply problems in South Africa," said
Walter de Wet, an analyst at Standard Bank in London.
Bank of America Merrill Lynch on Tuesday raised its 2010
platinum forecast to $1,750 an ounce from $1,440 an ounce, on
the launch of the new funds and an improving auto sector.
[]
But Bank of Nova Scotia's Simon Weeks was not as bullish as
most. "I think the economic recovery is not as strong as people
want to believe," he added.
Platinum's sister metal palladium <XPD=> retreated to
$457.00, from $464.50 late in New York on Tuesday.
HEADWINDS
Gold prices reflected currency market sentiment, with dollar
strength sapping the metal's appeal to non-U.S. investors.
Spot gold <XAU=> stood at $1,122.45 per ounce, down from
$1,137.95 quoted late in New York on Tuesday -- having earlier
hit a low of $1,118.90.
U.S. gold futures for February delivery <GCG0> were at
$1,122.50, down 1.5 percent from the settlement in New York.
Spot silver followed gold's lead, falling to $18.29 per
ounce <XAG=>.
External headwinds were gathering, with Chinese banking
authorities instructing some major banks to stop new lending for
the rest of January after loan growth surged in the first few
weeks of the year. []
With analysts expecting further tightening moves from China,
the gold market was seeing an indirect impact, as any signal of
higher real interest rates impacts the non-interest bearing
precious metal.
Barclays Capital said in a note to clients that investors
were beginning to reassess the bullish enthusiasm that had
characterised the New Year, with risks lurking for commodity
markets.
It noted recent price action in the credit default swap
(CDS) market that suggested investors are growing more cautious
on Europe as a whole and not just on Greece's debt problems.
"While the immediate implications are for further euro
weakness (and dollar strength), continued widening in core
European CDS spreads is likely to have bearish reverberations
across financial and commodity markets," Barclays said.
On the investment front, the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust <GLD>, said its holdings
stood at 1,111.922 tonnes as of Jan. 19, down 0.08 percent from
the previous business day. []
(Additional reporting by Miho Yoshikawa in Tokyo and Michael
Taylor in London; editing by Sue Thomas)
