* Gold falls on profit taking but sentiment positive
* ETF holdings hit new record above 850 tonnes
* High prices sideline jewellers
(Recasts, updates prices; changes dateline from SINGAPORE)
By Michael Taylor
LONDON, Feb 3 (Reuters) - Gold fell as much as 1 percent in
early trade on Monday as investors took profits after bullion
rallied to a near four-month high last week.
But record exchange traded fund holdings helped limit losses
and boost sentiment.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust, said holdings rose 9.78 tonnes to a record
853.37 tonnes as of Feb 2, up more than 9 percent in the past
month. []
At 1056 GMT, gold <XAU=> hit a low of $894.30 an ounce but
was last trading at $901.90/903.50, versus $903.15 at New York's
close on Monday, when it dropped more than 2 percent in selling
also driven by weak demand from the jewellery sector.
"In our view, rapidly growing ETF holdings are a clear sign
of safe haven buying of gold: this is the dominant factor in the
gold market at present," John Reade, a strategist at UBS, said
in a note.
"We hold our short-term gold price forecast at $900/oz as we
wait for these countervailing forces to wrestle for dominance
over the gold market, but would highlight the potential for
accelerated safe haven buying to take gold higher."
For details of gold holdings by the ETF listed in New York,
click on:
https://customers.reuters.com/d/graphics/MKTS_SPDRGLD0209.jpg
Gold has risen more than 30 percent since a 13-month low of
around $680 in late October, helped by a recovery in oil prices,
technical buying and investors looking for a safe place to park
their assets away from the volatile equity markets.
But high prices also scared off buyers from the jewellery
sector, which accounts for almost 70 percent of global demand
for gold. Gold was well below a lifetime high of $1,030.80
struck last March.
The volume of gold jewellery sales in Abu Dhabi fell 70
percent in January due to rising prices. []
"Basically, there's not much interest from the jewellery
sector and there's profit taking as well as light selling in
Asia," a dealer in Hong Kong said.
"But we can still see bargain hunting at lower levels.
That's why we also see a rebound, which is driven by bargain
hunters," the dealer said, referring to a fall to an intraday
low of $895.60 an ounce.
Platinum <XPT=> was last trading at $965/973 from $970.00
while silver <XAG=> was at $12.32/12.40 from $12.37.
Palladium <XPD=> traded at $193/198.00 from $193.50.
In other markets, the pan-European FTSEurofirst 300 <>
was about 1 percent lower. Oil was firmer at above $40 a barrel
after falling nearly 4 percent the previous session as U.S. data
ignited concerns over the economy and demand in the United
States. []
The dollar was little-changed <.DXY> ahead of expectations
the European Central Bank will keep interest rates steady later
this week and maintain the currency's yield appeal. []
Worries about the global economy persisted after data showed
U.S. consumption, which accounts for two-thirds of the country's
economy, fell for a sixth straight month in December. A separate
report pointed to continued weakness in U.S. factory activity in
January. [].
(Additional reporting by Lewa Pardomuan; editing by Sue
Thomas)
