(Adds closing in Tokyo, adds comments)
By Lewa Pardomuan
SINGAPORE, Jan 23 (Reuters) - Gold struggled to hold the
previous day's gains on Wednesday despite a falling U.S.
dollar, suggesting that the metal's sharp fluctuations had
turned some investors away.
Spot gold <XAU=> fell to $888.75/889.45 an ounce from
$890.30/891.00 an ounce in New York on Tuesday, when it tumbled
to a three-week low of $849.50 an ounce before a surprise rate
cut by the U.S. Federal Reserve sparked a rebound to $894.30.
Gold, which moved in a range of more than $40 on Tuesday,
has lost nearly 3 percent in value since hitting a record high
of $914 in January, as sliding energy and global equity prices
forced investors to sell the metal to cover margin calls.
"If market turmoil persists, it will of course influence the
precious metal market because it's still a financial asset,"
said William Kwan, a dealer at Phillip Futures in Singapore.
"Just for today, I think this will be the upper range. It
may try $890 again and $900 will be the resistant point. The
range will be wider because of volatility of the global
economy," he said.
The benchmark gold futures contract <0#JAU:> on the Tokyo
Commodity Exchange rose by the daily 120 yen per gram limit
after the Fed's rate cut lifted sentiment. It ended at 3,071
yen, up 117 yen from Tuesday's close.
The Federal Reserve on Tuesday cut benchmark interest rates
by three-quarters of a percentage point -- the biggest rate cut
in more than 23 years -- in an emergency bid to boost a U.S.
economy that some fear is on the verge of recession.
"It can't continue going up because we are still talking
about a possible recession in the U.S." said Ronald Leung,
director of Lee Cheong Gold Dealers in Hong Kong.
A recession in the U.S. could lead to declines in demand for
gold as an alternative investment and encourage funds to shift
to bonds, said Leung.
"Other countries will also be affected by a U.S. recession.
Maybe there will a little bit of support of $870. Resistance
will be $915 and $920," he said.
Fed policy makers are scheduled to meet on Jan. 29-30. In
the wake of the central bank's bold rate cut on Tuesday,
financial markets were expecting the Fed to lower borrowing
costs again by at least a quarter of a point. []
The euro <EUR=> hit a high of $1.4685 in early Tokyo trade,
extending its rally after surging 1.3 percent on Tuesday, its
biggest one-day percentage gain since early 2006.
COMEX gold futures gave up gains after rising 1 percent
overnight. The most active February contract <GCG8> lost $0.5
an ounce to $889.8 an ounce.
But some analysts remained bullish on gold, which gained
more than 30 percent last year.
"Gold's price is very much dependent on what happens to the
U.S. dollar, what happens to the euro," said Peter Hickson,
global stategist of UBS.
"There is a continuing supply problem in gold. I would
argue that gold prices would go through $1,000 per ounce," said
Hickson, adding that he expected gold to touch that level in
2008.
Platinum <XPT=> was unchanged at $1,550/1,555 an ounce but
off Tuesday's one-month low of $1,507 an ounce.
Silver <XAG=> was steady at $16.01/16.06 an ounce.
Palladium <XPD=> edged down to $366/371 an ounce from
$366.50/371.50.
Precious metals prices at 0838 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 888.40 -1.90 -0.21 6.69
Spot Silver 15.99 -0.04 -0.25 8.26
Spot Platinum 1550.00 2.00 +0.13 1.97
Spot Palladium 366.00 0.00 +0.00 -0.54
TOCOM Gold 3071.00 117.00 +3.96 0.36
85588
TOCOM Platinum 5185.00 137.00 +2.71 -2.88
40781
TOCOM Silver 553.30 22.20 +4.18 2.27
1698
TOCOM Palladium 1276.00 27.00 +2.16 -5.55
696
Euro/Dollar 1.4592
Dollar/Yen 106.41
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Rujun Shen in Shanghai; Editing by
Ben Tan)
