* Gold extends climb from $912.90 as dollar weakens
* SPDR gold ETF holdings <XAUEXT-NYS-TT> ease slightly
* Traders say gold price moving on inflation expectations
By Veronica Brown and Nick Vinocur
LONDON, June 23 (Reuters) - Gold rallied from a six-week low
hit earlier in the global session, rising above $923 per ounce
with currency fundamentals proving the dominant factor as the
dollar got stung by concerns over U.S. indebtedness.
Spot gold <XAU=> stood at $923.40 per ounce by 1132 GMT,
having earlier hit a six-week low at $912.90 in Asian trade. That
compared with $921.90 quoted late in New York on Monday.
Traders said that bullion prices, having hit three-month
highs recently just shy of $1,000 an ounce, were ripe for the
falls seen over the past few days with speculators looking to
clear out stale long positions.
But the metal's traditional role as a hedge against jittery
sentiment in other asset classes was also kicking in as
investors, spooked by doubts about growth prospects for leading
economies, shift into risk-averse gear.
Concerns about reserve diversification away from U.S. assets
caused the dollar to turn lower against the euro ahead of the
Federal Reserve's monthly meeting, after Moody's said one risk
to the U.S.' triple-A rating is if the dollar is challenged as
the main reserve currency. [].
"Gold is tracking the dollar closely today, but we'll have
to wait for the FOMC statement tomorrow night for the market to
choose to move clearly in one direction or another," said David
Thurtell, analyst at Citigroup.
A weaker dollar makes metals and other commodities priced in
the U.S. unit cheaper for non-U.S. investors.
Crude oil prices rallied to $68 <CLc1> a barrel on Tuesday
ahead of data expected to show a fall in U.S. oil stocks,
reversing losses and renewing the appeal of gold as a potential
inflation hedge.
"The key driver here is basically crude oil, the dollar and
inflation expectations, and I think gold at the moment is
pricing in a huge amount of inflation expectations," said Jesper
Dannesboe, an analyst at Societe Generale.
INVESTOR CAUTION
U.S. gold futures for August delivery <GCQ9> rose nearly
half a percent to $924.80 per ounce on Monday on the COMEX
division of the New York Mercantile Exchange.
Overall investor caution was stirred by the World Bank on
Monday, which said prospects for the global economy remained
"unusually uncertain" as it cut 2009 growth forecasts for most
economies.
"Investor risk appetite has lost forward momentum as the
market begins to question the extent to which the green shoots
of the financial risk rally have roots in the real economy,"
Tullet Prebon said in a note to clients.
"There is nothing like a 3.1 percent drop in the S&P on a
day to get the bears out of the woods..., but the joke aside it
is beginning to look like those who hoped for a V-shaped
recovery will find that we are looking at the tail end of it."
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings fell to 1,131.24 tonnes
as of June 22, down 0.91 tonnes from the previous business day.
[]
It was the first change in the holdings since June 5. The
holdings hit a record 1,134.03 tonnes earlier in the month.
In other metals, silver firmed slightly to $13.83 <XAG=>, up
from $13.72 quoted late in New York on Monday. Platinum <XPT=>
rose slightly to $1,167.50 from $1,159.50, while palladium <XPD=>
firmed to $234.50 from $232.00.
(Editing by James Jukwey)
