* Weak U.S. housing data prompts selling across the board
* Fed vows to keep rate exceptionally low
* SPDR gold ETF holdings hit record 1,313.135 T
* Coming up: US May durable goods data on Thursday
(Recasts, updates prices to market close, changes byline,
dateline, previous LONDON)
By Frank Tang
NEW YORK, June 23 (Reuters) - Gold fell on Wednesday but
bounced off early session lows as weak U.S. housing data
painted a bleak picture for economic recovery, prompting
bullion investors to lighten positions in a wave of broad-based
selling in commodity and stock markets.
After the U.S. COMEX settlement, the Federal Reserve said
at the end of its two-day policy meeting it acknowledged a
faltering pace of U.S. economic recovery as it renewed its vow
to hold interest rates exceptionally low for an extended
period. Precious metals prices largely ignored the Fed and
remained lower.
Solid gains in the holdings of the world's largest
gold-backed exchange traded funds suggested investment demand
continued to provide underlying support, and price volatility
could remain elevated due to near record COMEX open interest,
traders said.
In early trade, the metal hit its lowest in more than a
week after a report showed sales of new U.S. homes dropped a
record 32.7 percent in May to the weakest level in at least
four decades. []
James Steel, chief commodity analyst at HSBC, said the U.S.
economic news led to liquidation in gold and selling across
different asset markets under thin volume.
"The weak home sales data led to some liquidation in gold,
triggering the sale of some assets. The knee-jerk reaction for
gold was to sell off but it has been gradually paring loses,"
Steel said.
Spot gold <XAU=> was at $1,234.55 an ounce at 3:29 p.m. EDT
(1929 GMT), against $1,239 late in New York on Tuesday, having
slipped to a one-week low of $1,224.30 an ounce.
U.S. gold futures for August delivery <GCQ0> settled $6
lower at $1,234.80 an ounce.
Gold was pressured by the dollar strength and caught up in
selling of other assets as equity markets slipped after the
disappointing home sales data, with oil <CLc1> and
Reuters/Jefferies CRB index <.CRB> also dropping.
"There is (weakness) not just across commodities but across
all markets," said RBS analyst Daniel Major. "In terms of gold,
there is a slightly more risk-off tone today, which seems to
have resulted in dollar strength and... that has weighed on
gold."
Oil prices also fell by $2 to $76 a barrel after U.S.
government data showed U.S. crude stocks rose sharply last week
and the International Energy Agency forecast supplies would be
comfortable for five years. []
The usual inverse relationship between gold and the dollar,
which weakened at the beginning of the year as both rose on
risk aversion, seems to be reestablished, Major said.
Graphic:http://link.reuters.com/qud73m
The dollar fell against the euro after the Fed kept
interest rates low for an extended period.
Among other precious metals, silver <XAG=> fell to $18.46
from $18.74, platinum <XPT=> was at $1,569.50 an ounce versus
$1,582.50, and palladium <XPD=> at $472.50 against $481.50.
GOLD HOLDINGS RISE TO RECORD
Volume was lower than usual as some traders opted to stay
on the sidelines prior to the Federal Reserve's policy
statement later in the day. Some analysts also cited the
ongoing World Cup for lower-than-usual turnover.
Gold also benefits from persistently low interest rates, as
they keep down the opportunity cost of holding non-interest
bearing assets such as bullion.
Investment in gold ETFs climbed, with the SPDR gold ETF
noting a 5-tonne rise in its holdings to record highs at
1,313.135 tonnes on Tuesday. []
Prices at 3:34 p.m. EDT (1934 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCQ0> 1235.70 0.90 0.1% 12.7%
US silver <SIN0> 18.465 0.006 0.0% 9.6%
US platinum <PLN0> 1569.50 -23.50 -1.5% 6.7%
US palladium <PAU0> 474.50 -15.45 -3.2% 16.1%
Gold <XAU=> 1234.35 -4.65 -0.4% 12.6%
Silver <XAG=> 18.46 -0.28 -1.5% 9.6%
Platinum <XPT=> 1569.50 -13.00 -1.0% 6.9%
Palladium <XPD=> 472.50 -9.00 -1.9% 16.5%
Gold Fix <XAUFIX=> 1226.50 -16.50 -1.3% 11.1%
Silver Fix <XAGFIX=> 18.91 28.50 1.5% 11.3%
Platinum Fix <XPTFIX=> 1575.00 3.00 0.2% 7.4%
Palladium Fix <XPDFIX=> 485.00 1.00 0.2% 20.6%
(Additional reporting by Jan Harvey in London; Editing by
Sofina Mirza-Reid)
