* China's price controls pressure gold, commodities
* Ireland pledges to work with EU-IMF mission on banks
* Coming up: Philadelphia Fed index Thursday
(Recasts, updates comments and closing prices, adds NEW YORK
byline/dateline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, Nov 17 (Reuters) - Gold prices fell for a
fourth straight session on Wednesday, although stabilizing
somewhat a day after a 2 percent sell-off, as fears that China
may take aggressive measures to curb inflation pressured gold
and commodities.
Gold has now notched its biggest four-day loss since early
December as it has been punished in sync with other commodities
by investors' need to liquidate positions amid increasing
margin calls, a rising dollar and fear of more aggressive
tightening measures in China.
"Gold investors are afraid that China is going to put in
these price controls to clamp down on inflation and to raise
interest rates. So, the news cooled off speculation in the gold
market a bit," said Donald Selkin, chief market strategist of
National Securities Corp.
Analysts said China's measures to control consumer prices,
and possibly to raise interest rates, could constrain commodity
demand or drain liquidity from domestic markets.
While China's monetary policy has rarely had a long-term
impact on commodities, investors have used it as an opportunity
to move out of some riskier assets, cashing in some commodity
profits before the year-end.
The Reuters-Jefferies CRB <.CRB> index has dropped more
than 7 percent in five days, its biggest fall in 16 months,
while the Shanghai Composite Index <> has slumped 10
percent in four days of losses.
Spot gold <XAU=> dropped 0.4 percent to $1,334.70 an ounce
at 3:04 p.m. EST (2004 GMT). U.S. gold futures for December
delivery <GCZ0> settled down $1.50 at $1,336.90 an ounce, with
volume largely in line with their 250-day average.
Silver <XAG=> edged up 0.2 percent to $25.52 an ounce
COMEX open interest in both gold and silver futures rose
less than 1 percent on Tuesday, a day when both markets
tumbled, suggesting some investors might have opened new short
positions, or bearish bets.
Gold has shed more than 6 percent since hitting a record
$1,424.10 as the rebound in the dollar has triggered a torrent
of selling across the commodities complex.
Tame U.S. inflation also weighed on gold. The core consumer
price index touched a record low in October and new home
building sagged, lending support to the Federal Reserve's move
to boost the sluggish economy through additional monetary
easing. []
Rising concern over Ireland's ability to repay its debt has
pushed the euro to seven-week lows against the dollar, but the
greenback's strength is offsetting any potential safe-haven
flows into gold, such as those seen in May, at least for now.
[]
Wednesday's drop marked gold's longest stretch of
consecutive daily losses in five months, but it has not
suffered to the same extent as other raw materials.
"It's performed reasonably well in the correction relative
to, for example, some of the base metals. Gold is only off
about 6.5 percent from the high. Compare that to something like
zinc <CMZN3>, for example, which has plunged and is now down
about 20 percent from the recent highs," said Credit Suisse
analyst Tom Kendall. "That reinforces the defensive qualities
of gold and its diversification benefits."
Bullion prices remain under pressure from weakness in
commodities overall, with oil and base metals being heavily
sold following talk China might raise interest rates to cool
growth.
DOLLAR LINK
Gold is also suffering from the strength of the dollar,
with which it usually maintains a negative relationship.
This inverse correlation has strengthened in the past two
days, after having weakened almost continuously for the past
month as concern about the euro zone drove investors into both
gold and the dollar.
(Graph: http://link.reuters.com/gep85q)
Euro zone sovereign risk could also prove a big support
factor for gold. Ireland has pledged to work with a European
Union-IMF mission on steps to help a stricken banking sector.
[]
When worries over euro zone debt levels first came to the
fore in the second quarter, it sparked a surge in investment
demand for gold and pushed prices to then-record highs as
investors fretted about the stability of paper currencies.
Platinum <XPT=> fell 0.6 percent to $1,629.50 and palladium
<XPD=> gained 2 percent to $652.22.
Prices at 3:33 p.m. EST (2033 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1336.90 -1.50 -0.1% 22.0%
US silver <SIZ0> 25.511 0.278 0.0% 51.4%
US platinum <PLF1> 1640.90 -4.80 -0.3% 11.5%
US palladium <PAZ0> 654.85 8.95 1.4% 60.2%
Gold <XAU=> 1332.89 -6.91 -0.5% 21.6%
Silver <XAG=> 25.50 0.03 0.1% 51.4%
Platinum <XPT=> 1628.74 -9.76 -0.6% 11.1%
Palladium <XPD=> 652.22 12.75 2.0% 60.8%
Gold Fix <XAUFIX=> 1337.50 1.00 0.1% 21.2%
Silver Fix <XAGFIX=> 25.20 -28.00 -1.1% 48.3%
Platinum Fix <XPTFIX=> 1637.00 2.50 0.2% 11.7%
Palladium Fix <XPDFIX=> 649.00 10.00 1.6% 61.4%
(Additional reporting by Jan Harvey in London and Laura
MacInnis in Geneva; Editing by Walter Bagley)
