* Strong buying interest offsets big Middle East selling
* No fresh inflows to SPDR Gold holdings <XAUEXT-NYS-TT>
By Chikako Mogi
TOKYO, Aug 18 (Reuters) - Spot gold prices rose closer to
$940 an ounce on Tuesday as investors scooped up bullion after
prices fell sharply when doubts about an economic recovery
triggered sharp selling of cross-market assets the day before.
The euro inched up after falling against the dollar on
Monday, while oil and other commodities turned positive after
sinking the previous day when growth concerns led investors to
trim risk exposure and buy dollars.
Traders said the gold market will remain choppy as players
weighed two conflicting influences on bullion from risk aversion.
"The difficulty in explaining gold right now is that we've
got rising risk aversion versus rising U.S. dollar, and the
latter is having a greater influence," said Mark Pervan, senior
commodity strategist at ANZ in Melbourne.
"The negative influence from the currency is offsetting the
positive safe-haven influence," Pervan said.
A firmer dollar typically hurts the precious metal, as it
makes dollar-priced gold more expensive for non-dollar holders
and dampens interest in bullion as an alternative asset. []
Gold, on the other hand, is often bought for its safe-haven
status when investors don't want to take risks or want to hedge
against inflation risks.
As the dollar softened against the euro and investor risk
aversion moderated, the cheapened gold prices spurred bargain
hunting. But fears U.S. stocks could fall again when the markets
open later on Tuesday capped gold's upside, traders said.
Spot gold <XAU=> rose 0.6 percent to $938.60 an ounce as of
0541 GMT, compared with New York's notional close of $932.80 per
ounce.
U.S. gold futures for December delivery <GCZ9> rose 0.4
percent to $940.0 an ounce, compared with $935.80 on the COMEX
division of the New York Mercantile Exchange.
Spot gold prices, which hit a two-month high above $970 in
early August, fell to a 2-1/2-week low of $929.70 on Monday.
Traders said the price drop drew a wide range of buyers,
helping to offset large-lot selling and push up the market.
"There was quite a large volume of selling, from the Middle
East, but the market comfortably absorbed it," said Yuichi
Ikemizu, Tokyo branch manager at Standard Bank Plc, noting that
wide-ranging buying interest helped support the market.
Asian stocks pared earlier gains to be generally flat. []
[]
U.S. stocks suffered their worst loss in seven weeks on
Monday due to doubts about the economy's growth prospects. []
The euro rose 0.3 percent against the dollar, after hitting a
two-week low against it on Monday. []
Traders have said the rally in stocks and broad commodities
on expectations for global economic recovery had run ahead of
reality and a correction was due.
"Looking at how stocks are right now, there isn't a sense the
markets are bracing for a sharp downturn," Ikemizu said.
But if stock declines accelerate on growing doubts about
recovery prospects, industrial metals such as platinum, silver
and copper may face selling pressure and benefit gold, he said.
Physical demand was also expected to keep support firm for
spot gold above $900, he said.
Investor interest in gold, however, remained slack, with
holdings at the world's largest gold-backed exchange-traded fund,
the SPDR Gold Trust <GLD>, staying at 1,065.49 tonnes as of Aug.
17, unchanged from the previous business day. []
Spot silver <XAG=> inched up 0.8 percent to $14.08 an ounce
after tumbling nearly 6 percent to a two-week low of $13.82 an
ounce on Monday. Silver hit a two-month high of $15.16 on Friday
when a softer dollar and optimism over the economic outlook
lifted precious metals.
PRICES
Precious metals prices at 0546 GMT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 938.60 5.80 +0.62 6.64
Spot Silver 14.06 0.10 +0.72 24.20
Spot Platinum 1232.50 12.50 +1.02 32.24
Spot Palladium 268.00 3.00 +1.13 45.26
TOCOM Gold 2874.00 0.00 +0.00 11.70 38681
TOCOM Platinum 3772.00 -12.00 -0.32 42.23 12104
TOCOM Silver 432.00 -7.10 -1.62 35.30 193
TOCOM Palladium 825.00 -8.00 -0.96 50.00 413
Euro/Dollar 1.4117
Dollar/Yen 94.87
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Chris Gallagher)
