* Gold hit by dollar rise as Fed unlikely to extend QE2
* Technical selling hit prices after Thursday's reversal
* Renewed euro zone debt worries, Mideast violence support
* Coming up: U.S. personal income on Monday
(Rewrites, updates market activity, adds graphic, changes
dateline, previously NEW YORK/LONDON)
By Frank Tang
NEW YORK, March 25 (Reuters) - Gold reversed gains in high
volume on Friday, hit by a dollar spike after several top U.S.
Federal Reserve officials said the Fed is unlikely to extend
its bond-buying stimulus program beyond a planned $600
billion.
Bullion lost nearly 2 percent following a brief rally to an
all-time high $1,447.40 on Thursday, but the metal is set to
post a small gain for the week as Portugal's credit downgrade
and escalating political unrest in the Arab world underpinned
safe-haven demand.
"Gold really took off last fall when the Fed launched QE2.
So, negative comments (by Fed officials) has dampened investor
sentiment in gold to some extent," said Peter Buchanan, senior
economist of CIBC World Markets.
Spot gold <XAU=> dropped 0.1 percent to $1,427.91 an ounce
by 3:23 p.m. EDT (1923 GMT). U.S. gold futures for April
delivery <GCJ1> settled down 0.6 percent at $1,426.20.
COMEX gold was one of the few actively trading commodity
markets with volume already topping 250,000 contracts, one of
the heaviest trading days year to date.
NO QE2 EXTENSION?
Members of the more hawkish wing of the Fed, led by
Philadelphia Fed Bank President Charles Plosser, said the
central bank will have to reverse its easy money policy in the
"not-too-distant future" to avoid sowing the seeds of inflation
as the U.S. economy is now on firmer footing. []
Last November, the Fed initiated a $600 billion bond buying
program -- dubbed QE2 because it is the second round of
quantitative easing -- which is scheduled to end in June.
Analysts said gold was a major beneficiary since the Fed
has kept short-term rates near zero since December 2008 and has
bought more than $2 trillion in long-term securities to push
borrowing costs down further and boost recovery from the
2007-2009 recession.
RESISTANCE AFTER TOP REVERSAL
The metal remains pressured by strong technical resistance
seen after Thursday's top reversal day pattern, where a new
high set in an uptrend is followed by a close below that of the
previous day.
(Graphic on top reversal: http://link.reuters.com/kud78r)
"After the key technical reversal yesterday, when we could
not turn around and blow through the record high, everybody
started heading for the door at the same time," said Frank
McGhee, head precious metals trader of Integrated Brokerage
Services.
A key reversal day could mark an important turning point on
technical charts, and analysts said near-term price actions are
likely to set its course.
Rick Bensignor, chief market strategist of Dahlman Rose
said that a close above key resistance at $1,445.40 could send
bullion to another leg higher.
GOLD SET FOR BIGGEST QUATERLY OUTFLOW
Despite gold's recent strong performance, inflows into
exchange-traded funds backed by the precious metal remained
lackluster, with holdings of the largest, New York's SPDR Gold
Trust <GLD>, down by another 0.9 tonnes on Thursday.
They are so far on track to fall more than 65 tonnes this
quarter alone, which would be the fund's largest quarterly
outflow since it was launched in 2004. However, interest in
bullion from other sources is outweighing these outflows.
Gold investors now look forward to next week's heavyweight
economic indicators, including Friday's nonfarm payrolls
report, Wednesday's ADP private-sector job data and Thursday's
factory orders.
Silver <XAG=> gained 0.2 percent to $37.21 an ounce, having
retreated from the previous session's 31-year high at $38.13 an
ounce. Holdings of the largest silver ETF, the iShares Silver
Trust <SLV>, leapt to a record 11,140 tonnes on Thursday.
Platinum <XPT=> dropped 0.2 percent to $1,744.49 an ounce,
while palladium <XPD=> fell 0.2 percent to $747.22.
Prices at 3:23 p.m. EDT (1922 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1426.20 -8.70 -0.6% 0.3%
US silver <SIK1> 37.049 -0.326 0.0% 19.8%
US platinum <PLJ1> 1745.60 -14.40 -0.8% -1.8%
US palladium <PAM1> 750.40 -1.85 -0.2% -6.6%
Gold <XAU=> 1427.91 -1.58 -0.1% 0.6%
Silver <XAG=> 37.21 0.09 0.2% 20.6%
Platinum <XPT=> 1744.49 -4.26 -0.2% -1.3%
Palladium <XPD=> 747.22 -1.75 -0.2% -6.5%
Gold Fix <XAUFIX=> 1436.00 2.00 0.1% 1.8%
Silver Fix <XAGFIX=> 37.68 -10.00 -0.3% 23.0%
Platinum Fix <XPTFIX=> 1752.00 6.00 0.3% 1.2%
Palladium Fix <XPDFIX=> 754.00 5.00 0.7% -4.7%
(Additional reporting by Jan Harvey in London; Editing by
Sofina Mirza-Reid and Marguerita Choy)
