* Gold hits 3-week low as dollar rally spooks investors
* Follow-through selling seen based on positive US data
* Analysts remain long-term positive despite pullback
(Recasts, updates closing prices, market activity, adds
comments, dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Dec 8 (Reuters) - Gold tumbled to a
three-week low under $1,030 an ounce on Tuesday, as a resurgent
dollar and risk-averse sentiment sent skittish bullion
investors scrambling to cut positions.
The metal fell sharply for a third straight session as
expectations of a dollar rally spooked gold investors, and some
institutional players opted to lock in profits ahead of the
year-end.
Sentiment in the U.S. dollar has become highly positive
after a government report last Friday showed that U.S. job
losses in November was far less than expected.
Commerzbank analyst Eugen Weinberg said gold was vulnerable
to a further recovery in the U.S. currency.
"Should the dollar strengthen in the coming days, it would
be very difficult for gold prices to hold at current levels,
because it would take one of the most important arguments (for
buying gold) away from the market," he said.
Spot gold <XAU=> was at $1,129.95 an ounce at 3:33 p.m. EST
(2033 GMT), against $1,156.90 late in New York on Monday. It
hit a session low of $1,125.95, the weakest price since Nov.
16.
U.S. February gold futures <GCG0> settled down $20.60, or
1.8 percent, at $1,143.40 an ounce on the NYMEX.
The dollar strengthened against the euro, with the single
currency feeling the pinch as investors worried about Greece's
fiscal health after Fitch downgraded the euro zone member's
credit rating. []
Traders attributed gold's decline in the last three
sessions from record highs to a recovery in the dollar after
positive economic data lifted hopes that the world's biggest
economy may be stabilizing.
"If there is any inclination that the Fed will raise
interest rates at any time, then the decline will be even
worse," said Miguel Perez-Santalla, vice president of sales
Heraeus Precious Metals Management.
On Monday, gold posted its biggest two-day percentage loss
since October, 2008, but remained up about 30 percent year to
date. Bullion hit a record high of $1,226.10 just last week.
Strength in the U.S. unit dents gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies.
For a graphic showing gold's correlation with the dollar,
click:
http://graphics.thomsonreuters.com/129/GLD_EURCR1209.gif
LONG TERM POSITIVE
In official gold-sector news, a Chinese newspaper said on
Tuesday that China should increase the proportion of gold in
its foreign exchange reserves to ensure the safety of its
overall portfolio. []
Even as analysts said gold could pull back in the near
term, they contended that the metal's long-term fundamentals
remained positive.
HSBC raised its gold price forecasts for 2009 to $990 an
ounce from $925 previously, and said it sees prices at $1,150
an ounce next year, against $950 previously.
Expectations for further central bank diversification into
gold is supporting investment in the metal, analysts said, and
the recent price dip may encourage this.
Among other precious metals, silver <XAG=> was at $17.60 an
ounce against $18.16, platinum <XPT=> at $1,410.50 an ounce
against $1,438.50 and palladium <XPD=> at $364 against $371.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCG0> 1143.40 -20.6 -1.8 884.3 29.3
US silver <SIH0> 17.807 -0.553 -3.0 11.295 57.7
US platinum <PLF0> 1440.40 -4.20 -0.3 941.50 53.0
US palladium <PAH0> 375.35 0.10 0.0 188.70 98.9
Prices at 3:42 p.m. EST (2042 GMT)
Gold <XAU=> 1129.05 -27.85 -2.4 878.20 28.6
Silver <XAG=> 17.61 -0.55 -3.0 11.30 55.8
Platinum <XPT=> 1411.50 -27.00 -1.9 924.50 52.7
Palladium <XPD=> 364.50 -6.500 -1.8 184.50 97.6
Gold Fix <XAUFIX=> 1146.75 -17.50 -1.5 836.50 37.1
Silver Fix <XAGFIX=> 18.11 7.00 0.4 14.76 22.7
Platinum Fix <XPTFIX=> 1439.00 16.00 1.1 1529 -5.9
Palladium Fix<XPDFIX=> 374.00 3.00 0.8 365.0 2.5
(Reporting by Frank Tang and Jan Harvey)
