* Gold cuts losses as dollar falls after Bernanke
* Bernanke remarks suggest interest rates to stay low
* Sentiment firm despite SPDR gold ETF outflow on Friday
(Recasts, updates prices, market activity)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Dec 7 (Reuters) - Gold prices settled
slightly lower on Monday, rebounding from session lows as the
dollar weakened after the Federal Reserve chief cautioned that
the U.S. economic recovery remains fragile.
Federal Reserve Chairman Ben Bernanke said the economy has
improved, but the jobless rate may remain elevated.
[]
Gold and other investments have rallied this year as the
Fed kept interest rates at near zero and expanded money to jolt
the economy out of the worst recession since the Great
Depression.
U.S. February gold futures <GCG0> settled down $5.50 at
$1,164 an ounce on the COMEX division of the NYMEX. Gold
futures posted their biggest two-session percentage loss since
October, 2008.
Frank McGhee, head precious metals trader of Integrated
Brokerage Services, cited dollar weakness and short-covering
for gold's turnaround following Bernanke's comments.
"At the end of the day, I think the gold story has been
more of a monetary story, rather than an inflation story," said
McGhee, adding that it may take a year or two for inflation to
wreak havoc on the economy.
Spot gold <XAU=> was at $1,155.45 an ounce at 3:43 p.m. EST
(2043 GMT), against $1,159.55 late in New York on Friday.
Earlier in the session, bullion hit a two-week low at under
$1,140 an ounce, extending sharp losses from Friday, when a
dollar rally based on much better-than-expected U.S. data sent
investors racing to cut positions.
Friday's optimistic non-farm payrolls data prompted
speculation the Fed may lift interest rates from their current
historic lows sooner rather than later, which could help the
dollar and cut support for gold.
Tom Kendall, precious metals strategist at Mitsubishi Corp,
said while the jobs data and the dollar's subsequent bounce
were pressuring gold, he did not expect to see a significant
change to expectations for U.S. monetary policy.
"I don't think a couple of data points are really enough to
make people re-adjust their expectations of what the U.S.
Treasury and the Federal Reserve are going to be doing in the
next six to nine months," he said.
DOLLAR SLIDES
The dollar fell against the euro <EUR=> on the view that
U.S. rates will stay low for quite some time. The greenback had
been trading higher against the common unit most of the
session.
Analysts say gold has not corrected as deeply as might have
been expected, given its sharp rise in November. "Gold's
failure to collapse more than this may be seen as a sign of
support in the market," said Fairfax analyst John Meyer in a
note.
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For graphic showing gold's correlation with the
euro-dollar, click:
http://graphics.thomsonreuters.com/129/GLD_EURCR1209.gif
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Other commodities also fell, with oil prices easing 1
percent to below $75 a barrel. []
Gold tends to track crude prices, as the metal can be
bought as a hedge against oil-led inflation.
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(For a graphic on gold's relationship with inflation
expectations, click on:
http://graphics.thomsonreuters.com/129/GLD_TPSS1209.gif
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On the investment side, the world's largest gold-backed
exchange-traded fund, the SPDR Gold Trust, said its holdings
eased 1.524 tonnes to 1,129.966 tonnes on Friday. []
Among other precious metals, silver <XAG=> was at $18.17 an
ounce against $18.43, while platinum <XPT=> was at $1,431.50
versus $1,440.50 and palladium <XPD=> at $372 versus $371.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCG0> 1164.00 -5.5 -0.5 884.3 31.6
US silver <SIH0> 18.360 -0.160 -0.9 11.295 62.5
US platinum <PLF0> 1444.60 -5.10 -0.4 941.50 53.4
US palladium <PAH0> 375.25 -4.05 -1.1 188.70 98.9
Prices at 3:07 p.m. EST (2007 GMT)
Gold <XAU=> 1158.15 -1.40 -0.1 878.20 31.9
Silver <XAG=> 18.19 -0.24 -1.3 11.30 61.0
Platinum <XPT=> 1438.50 -2.00 -0.1 924.50 55.6
Palladium <XPD=> 373.50 2.500 0.7 184.50 102.4
Gold Fix <XAUFIX=> 1142.50 -5.00 -0.4 836.50 36.6
Silver Fix <XAGFIX=> 18.04 -79.00 -4.2 14.76 22.2
Platinum Fix <XPTFIX=> 1430.00 3.00 0.2 1529 -6.5
Palladium Fix<XPDFIX=> 367.50 1.00 0.3 365.0 0.7
(Reporting by Frank Tang and Jan Harvey; Editing by David
Gregorio)
