* Equity markets resume losses, key index hits lifetime low
* SPDR gold ETF sees no fresh inflows, holds Thursday level
(Updates prices)
By Jan Harvey
LONDON, March 3 (Reuters) - Gold eased on Tuesday as
European equities resumed their slide, prompting selling of the
metal to cover losses on other markets and because waning
interest in exchange-traded funds worried investors.
Spot gold <XAU=> was at $922.15/923.15 an ounce at 1203 GMT
from $925.35 late in New York on Monday. Earlier it touched a
near three-week low of $919.90 an ounce.
"Everyone is looking at the ETF numbers," said Deutsche Bank
trader Michael Blumenroth. "As long as there was money coming
into the ETFs, there was constant demand for gold.
"If this stops, we could see some medium term holders of
gold leaving the market," he said. "A continuation -- or not --
of buying of gold ETFs will be the most interesting point to
watch at the moment."
Heavy inflows into gold ETFs at the beginning of the year
were a key factor in pushing prices higher but these stalled
after the metal broke through $1,000 an ounce last month.
The world's largest gold-backed ETF, the SPDR Gold Trust
<GLD>, said its holdings were 1,029.29 tonnes on Monday, steady
from Thursday and up only 5 tonnes in nearly a fortnight.
Traders are also keeping a close eye on the equity markets.
Gold slipped 1.5 percent on Monday as global stock markets
plummeted, with Wall Street falling to 12-year lows, forcing
some investors to sell the precious metal to meet margin calls.
Prices slipped further as Tokyo stocks neared 26-year lows
and other indexes in Asia fell.
Gold can benefit from turmoil in equities, as it is seen as
a haven from risk. However, in the short term it may get caught
up in selling as investors raise cash to cover their losses.
"It appears that equity market margin calls, resulting in
widespread asset liquidation, are inhibiting precious metals'
attempt to take advantage of equities' demise," said Standard
Bank analyst Walter de Wet.
Gold recovered as European shares crept higher at the open,
with investors hunting bargains after sharp losses, but eased
again as they then fell, with the key pan-European FTSEurofirst
300 <> index hitting a lifetime low. []
Among other assets, oil partially recovered after a 10
percent drop. Gold tends to track the price of crude oil, which
is seen as the bellwether of the commodities complex.
[]
The other main external driver of gold, the dollar,
recovered after weakening in earlier trade as equities recovered
some of the previous day's losses. []
DECISIONS
Traders are awaiting interest rate decisions from the
European Central Bank and the Bank of England later in the week.
They are also keeping a close eye on the inflation outlook.
UBS strategist John Reade said gold moved higher from
mid-January as inflation expectations, as measured by spread
rates in treasury bond markets, recovered from lows.
"The fact that the recent correction in gold has been
accompanied by falling long dated...spreads should come as no
surprise," he said.
"We suspect the market is reacting to the much worse than
expected U.S. growth data and that the prospects of short term
deflation are now increasing again, outweighing minority-held
fears of much higher long-term inflation," he added.
In India, the world's largest gold market, a 3 percent drop
in rupee-denominated gold failed to attract buyers. Sales have
suffered from rising prices.
"There is not much demand even as prices have fallen," said
Pinakin Vyaas, chief manager-treasury with IndusInd Bank in
Mumbai. "Orders are there... (but) in a range of $900/908."
The rising supply of gold scrap in Asia and the Middle East
as gold holders cash in on the metal's higher price is easily
meeting demand and depressing prices, dealers say.
Among other precious metals, spot platinum <XPT=> eased to
$1,045.50/1,050.50 an ounce from $1,054, while palladium <XPD=>
was at $187.50/192.50 an ounce from $190.50. Spot silver <XAG=>
slipped to $12.67/12.73 an ounce from $12.91.
(Reporting by Jan Harvey; Editing by Anthony Barker)
