* AIG seeks cash injection, HSBC unveils rights issue
* SPDR gold ETF holdings unchanged, iShares Silver dips
(Recasts, updates prices and comments)
By Jan Harvey
LONDON, March 2 (Reuters) - Gold erased its earlier gains
and dropped 1 percent on Monday, heavy losses in equity markets
triggering profit-taking after the metal failed to climb further
above $1,000 an ounce last week.
Traders also said waning demand from bullion ETFs was
another factor which caused the market to run out of steam.
Investors fleeing from risk rushed to bullion over the last few
weeks, buoying bullion to $1,005.40 an ounce on Feb 20.
Spot gold <XAU=> was at $931.85/933.05 an ounce at 1602 GMT
against $939.90 late on Friday, after rising around 2 percent
earlier to hit a high of $958.00.
U.S. gold futures for April delivery <GCJ9> on the COMEX
division of the New York Mercantile Exchange fell more than $9
to $933.10 an ounce, down from a peak of $959.50.
"All the equity indices are down, all the equity futures are
down," said Michael Widmer, an analyst at BNP Paribas. "Given
the size of some of the declines we are seeing, there has been
some profit taking on gold."
World stocks slid to a near six-year low on Monday, with the
MSCI world equity index <.MIWD00000PUS> falling 2.1 percent
while U.S. stocks opened sharply lower after AIG reported a
$61.7 billion quarterly loss.[]
Britain's FTSE 100 <> fell 4.6 percent after HSBC
launched a 12.85 billion pound-rights issue to help it overcome
big losses in the United States. []
The dollar firmed against most currencies as investors said
the U.S. unit looked less risky. A stronger dollar typically
weighs on gold, but both assets are currently benefiting from
risk aversion. []
DISAPPOINTED
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD>, said it saw no fresh inflows on
Friday, though its holdings are at record levels. []
"It is disappointed liqudation," said Simon Weeks, director
of precious metals at the Bank of Nove Scotia. "There was a lot
of scrap coming into the markets in recent weeks and that was
absorbed by the ETF demand but the pace of ETF demand slowed in
the last few days so the market feels just a little bit heavy at
the moment," he said.
"If we get through $930 an ounce then it may extend further
on the downside," he added.
Buying by bullion ETFs, which issue securities backed by
physical gold, has formed a major tranche of demand since the
beginning of the year. However, these inflows waned last week.
"If ETF inflows remain absent from the market, we suspect
that gold can test lower levels in the days to come," said UBS
strategist John Reade in a note.
"But it is worth noting that our U.S. ETF desk reported the
strongest buying interest for weeks on Friday, all from
retail buyers," he added.
He said that if this became a stronger trend in the market
it could mark the end of the correction in gold.
Analysts say they are watching a raft of key data due out
this week for clues as to the next direction of the markets.
On Monday data showed that U.S. factory activity contracted
again in February, but at a less severe rate, according to an
industry report released on Monday.[]
China and the euro zone have already reported declines in
manufacturing activity that month, with euro zone manufacturers
suffering their worst month in 12 years. []
Spot silver <XAG=> fell to $12.80/12.86 an ounce from
$13.05.
Buying by silver ETFs has also been key to keeping prices
high. However, the world's largest such fund, the iShares Silver
Trust <SLV>, reported its first outflow since Jan. 5 on Friday,
though its holdings remain at high levels. []
Platinum <XPT=> was at $1,069.50/1,079.50 an ounce from
$1,071, while palladium <XPD=> was at $191.00/196.00 an ounce
from $193.50.
(Additional reporting by Humeyra Pamuk; Editing by Peter
Blackburn)
