* Gold rises back through $900/oz; weak demand limits gains
* Easing gold investment adds to sluggish jewellery sales
* CBGA sales only 80 T so far in pact's fifth year-WGC
(Updates throughout, previous TOKYO)
By Jan Harvey
LONDON, March 11 (Reuters) - Gold rose back above $900 an
ounce in Europe on Wednesday as bargain hunters took advantage
of the previous session's near 3 percent losses, but gains were
limited by sluggish demand.
Spot gold <XAU=> rose to $901/95/903.45 an ounce at 0939 GMT
from $895.80 late in New York on Tuesday. It fell around $25 an
ounce in that session as a recovery in equity markets diverted
investment from gold.
"There has been some industrial interest now that the price
has come off so much," said Wolfgang Wrzesniok-Rossbach, head of
sales at precious metals house Heraeus. "The investment side
very quiet at the moment, for a change."
Strong demand from investors for products like bullion-
backed exchange-traded funds had offset falling jewellery demand
earlier in the year, but this is now stalling.
Holdings of the SPDR Gold Trust <GLD>, the world's biggest
gold ETF, were unchanged on Tuesday. Its stocks have increased
by less than five tonnes in the last three weeks, compared to
around 200 tonnes in the first six weeks of 2009. []
"It's becoming evident that the buying in ETFs may have been
led by a small group of hedge funds, whose actions can be
incredibly difficult to predict," said MF Global analyst Tom
Pawlicki.
Jewellery buying -- the main source of gold demand -- is
also sluggish as prices hold near $900, especially in gold's
traditional main markets such as India. Supply of gold scrap
from Turkey, the Middle East and Asia is also rising.
Having received early support from bargain hunters, gold
lifted through $900 an ounce as European equity markets slipped
at the open. The metal was pressured on Tuesday by a recovery in
stock markets, which diverted interest from gold. []
FLIGHT
The dollar strengthened against most major currencies on
Wednesday as a slump in China's exports in February sparked a
flight to safety. []
While a firmer dollar usually pressures gold -- which is
bought as an alternative to the U.S. currency -- the two assets
are moving together at present as both react to risk aversion.
In supply news, the World Gold Council said signatories to
the Central Bank Gold Agreement -- which include a number of
European central banks and the IMF -- have sold only 80 tonnes
of gold since the pact entered its fifth year in late September.
Under the terms of the agreement, the banks can sell up to
500 tonnes of gold per year. []
"Unless the pace of official sector sales increases
significantly, the CBGA will undershoot the 500-tonne quota by
an even wider margin than it did last year," said HSBC analyst
James Steel.
"Reduced central bank sales are among the most notable
bullish factors in the market," he said.
Among other precious metals, spot platinum <XPT=> edged up
to $1,048/1,058 an ounce from $1,039.50. The metal, which is
primarily bought by industrial users, is suffering from
expectations a recession will weigh heavily on demand.
"It is too early for optimism about a substantial rise in
jewellery and autocatalyst demand," said Standard Bank.
Spot palladium <XPD=> firmed to $197/200 an ounce from
$195.50, while spot silver <XAG=> tracked gold up to
$12.72/12.79 an ounce from $12.57.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
