* U.S. weekly jobless claims pressure the dollar
* Physical demand weak, scrap supply emerging, traders say
* ETF Securities palladium ETC holdings rise to record
(Updates prices, adds comment)
By Jan Harvey
LONDON, Sept 10 (Reuters) - Gold edged back above $990 an
ounce in Europe on Thursday as the dollar index weakened after
U.S. weekly jobs data, fuelling interest in the precious metal
as an alternative asset.
The metal remained under pressure, however, as investors
cashed in gains after the metal's rise to 18-month highs earlier
in the week, with the re-emergence of scrap selling also proving
a drag on prices, traders said.
Spot gold <XAU=> was bid at $990.80 an ounce at 1254 GMT
against $991.15 late in New York on Wednesday, having touched a
low of $982.10 in earlier trade.
"In my view, the only reason gold is holding up here is the
U.S. dollar," said Afshin Nabavi, head of trading at MKS Finance
in Geneva. "Apart from the speculative (buying), we have not
seen much buying interest."
He said selling of gold scrap had picked up as prices rose.
The metal rallied above $1,000 an ounce for only the third
time in history on Tuesday after breaking a number of key
technical resistance levels. News Barrick Gold was cutting its
hedgebook of forward gold sales fuelled gains. []
Gold is now mainly relying on dollar weakness for support.
The dollar index <.DXY> declined on Thursday after data showed
the number of workers filing new claims for jobless benefits
fell last week. The euro hit a year-high against the U.S. unit.
[]
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 towards $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. []
Traders say they are waiting to see whether the gains that
took gold 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.
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.
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange fell $5.10 to
$991.90 an ounce.
Among other precious metals, silver <XAG=> fell to $16.37
from $16.27, platinum <XPT=> was at $1,277 against $1,276, while
palladium <XPD=> was flat at $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. []
(Editing by James Jukwey, editing by Anthony Barker)
