* Weak jewelry demand, strong dollar hit prices
* SPDR gold ETF records first outflow since early January
* Julius Baer's gold ETF up 18 percent last week
(Recasts, updates prices, market activity; adds second byline,
dateline, previously LONDON)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, March 9 (Reuters) - Gold prices dropped
more than 2 percent on Monday, as a dollar rise and slight drop
of holdings of gold-backed exchange traded funds triggered
heavy sell-stop orders.
Higher gold prices and global recession weighed down gold
jewelry buying, which accounts for about 60 percent of total
gold demand, traders said.
"There is a big bull-and-bear disparity in gold. There is
investment buying but no jewelry buying, which has dropped
sharply," said Jonathan Jossen, a COMEX gold floor trader.
Spot gold <XAU=> fell to a low of $911.95 an ounce and was
at $918.15 an ounce at 1:22 p.m. EDT (1722 GMT), down 2.3
percent from its last quote $939.60 in New York late Friday.
Gold for April delivery <GCJ9> settled down $24.70, or 2.6
percent, at $918.00 an ounce on the COMEX division of the New
York Mercantile Exchange.
Demand for gold from jewelry buyers in traditionally strong
markets remained weak.
In February, a trade group in top gold consumer India said
gold imports in 2009 should be flat from last year.
Traders said scrap sales also put pressure on premiums for
gold bars.
On Monday, the dollar rose amid global recession fears and
banking sector concerns, prompting investors to divert money
out of gold and into U.S. Treasuries. []
A stronger dollar makes metals more expensive for holders
of other currencies. Gold often rises when the dollar falls.
The world's largest gold-backed exchange traded fund (ETF)
recorded its first decline since Jan. 8. Its holdings dipped
0.3 tonnes to 1,028.99 tonnes as of March 8. []
Investors also favored oil at the expense of gold on
Monday. Oil rallied 4 percent at above $47 per barrel.
"A lot of people think gold is much too high compared to
where crude is, so they are taking profit," Jossen said.
SOLID ETF DEMAND
Demand for gold from ETFs, which issue securities backed by
physical stocks of gold, helped drive bullion higher earlier in
the year. Traders said they expected these inflows to resume.
"I think that there will be enough worrying news in the
first half of 2009 for ETF demand to remain solid," said David
Thurtell, an analyst at Citigroup.
Holdings of Julius Baer's <BAER.VX> gold-backed exchange
traded fund rose 109,000 ounces or 18 percent last week, the
bank said in a weekly statement on Monday. []
Spot silver <XAG=> was at $12.93 an ounce, down 2.9 percent
from its Friday finish of $13.32. Platinum <XPT=> at $1,056.50
an ounce, down 2.7 percent from its previous close of $1,066,
while palladium <XPD=> 195.50 an ounce, down 2.7 percent from
its late Friday New York quote of $201.
(Additional reporting by Paul Lauener and Pratima Desai;
Editing by David Gregorio)
