* Physical demand weak, scrap emerging in Asia, trader says
* ETF Securities palladium ETC holdings rise to record
(Updates throughout, previous TOKYO)
By Jan Harvey
LONDON, Sept 10 (Reuters) - Gold prices slipped below $990
an ounce in Europe on Thursday, giving up earlier gains, as the
dollar index <.DXY> turned higher, denting interest in the
precious metal as an alternative asset.
Traders say they are waiting to see whether the gains that
took the metal above $1,000 an ounce for only the third time in
history on Tuesday can be sustained. If the metal seems
vulnerable at higher levels, selling is likely to gain momentum.
Spot gold <XAU=> eased to $988.30 an ounce at 0940 GMT
against $991.15 late in New York on Wednesday. U.S. gold futures
for December delivery <GCZ9> on the COMEX division of the New
York Mercantile Exchange fell $6.80 to $990.40 an ounce.
Heraeus' head of sales Wolfgang Wrzesniok-Rossbach said gold
had struggled to establish itself at higher levels.
"We have had bad news on physical demand from India and
Turkey, we are seeing a lot of scrap coming in, for example from
Hong Kong ... (and) industrial demand is low, so from a
fundamental point of view there is no reason for gold to trade
above $1,000," he added.
Gold is mainly relying on dollar weakness for support, and
will need to close above the $1,000 level to be in a position to
challenge its all-time high of $1,030.80 an ounce, set in March
last year, Wrzesniok-Rossbach said.
The dollar index <.DXY> edged higher on Thursday, recovering
after approaching its lowest point this year. Firmer stock
markets and rising oil prices have boosted interest in
currencies seen as higher risk in recent sessions. []
A weak U.S. currency boosts interest in gold as an
alternative asset, and also makes the dollar-priced precious
metal cheaper for non-U.S. investors.
"The traditional inverse relationship between gold and the
U.S. dollar appears to have been re-established during the
current gold rally," said HSBC analyst James Steel in a note.
"The potential for U.S. dollar weakness is among the most
compelling factors supporting the rally."
OIL CLIMBS
Crude oil prices climbed back above $72 a barrel on
Thursday, further supporting gold, which is often bought as a
hedge against oil-led inflation. []
Oil is benefiting from a rise in stock markets, dollar
weakness, and soothing words from the OPEC producer group. On
the wider markets, world stocks and European equities rallied to
11-month highs, building on recent gains. []
Among other precious metals, silver <XAG=> was flat at
$16.27, platinum <XPT=> was at $1,273.50 against $1,276, while
palladium <XPD=> was at $289 against $290.50.
ETF Securities said holdings of its London palladium-backed
exchange-traded fund <PHPD.L> rose 5.5 percent to a record
477,766 ounces, while its gold and silver-backed products also
recorded inflows. []
"Investment demand will continue to erode overhead
resistance between $296-305," said James Moore, an analyst at
TheBullionDesk.com.
(Editing by James Jukwey)
