* U.S. CPI climbs 0.4 percent in February
* Bank of Japan says will buy government bonds
* Paulson & Co buys $1.3 billion stake in AngloGold Ashanti
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, March 18 (Reuters) - Gold extended losses to fall
more than 2 percent on Wednesday as appetite for risk improved,
denting the precious metal's appeal as a haven, and after the
release of "benign" U.S. February inflation data.
Spot gold <XAU=> touched a low of $892.00 an ounce and was
at $893.50/895.00 an ounce at 1434 GMT from $914.20 late in New
York on Tuesday.
U.S. gold futures for April delivery <GCJ9> on the COMEX
division of the New York Mercantile Exchange fell $22.20 to
$894.60 an ounce.
The U.S. consumer price index rose by 0.4 percent in
February on higher gasoline and apparel prices, according to
government data. The number was "not high", according to
analysts. []
"The inflation data was extremely benign - a disappointment
to the gold-inflation bugs," said Citigroup analyst David
Thurtell.
HSBC analyst Jim Steel told Reuters the data,"combined with
the recovery of risk appetite... would be negative for bullion."
Traders are awaiting the conclusion of the U.S. Federal
Reserve's two-day policy meeting later in the session.
The Fed is expected to renew its vow to do whatever is
necessary to pull the economy out of recession. It has also been
contemplating purchases of long-dated government debt to keep
interest rates low by expanding money supply. []
The Bank of Japan stepped up its outright purchases of
Japanese government bonds earlier on Wednesday, a move MF Global
analyst Tom Pawlicki said in a note could put pressure on gold.
"The yen correlates strongly with gold, and further yen
weakness could imply reduced need for safe-haven," he said.
Investors often borrow yen to invest in other higher
yielding, riskier assets.
Demand for gold as a safe store of value was also hit after
better-than-expected U.S. and German economic data boosted world
stocks earlier on Wednesday, with MSCI's all-country index
<.MIWD00000PUS> climbing as much as 0.3 percent. []
Prices are also being pressured by the growing tide of scrap
metal returning to the market, as consumers are tempted to sell
old jewellery by high prices and pushed to raise cash by the
faltering economy. []
"Our conversations with scrap recyclers... lead us to
believe that high prices have triggered a significant increase
in recycling, particularly in India, the Middle East, and other
price-sensitive regions in recent months," said HSBC in a note.
STAKE
U.S. hedge fund Paulson & Co showed its confidence in the
gold sector with the purchase of a $1.3 billion stake in the
world's third largest gold miner, AngloGold Ashanti <AGLJ.J>,
from mining group Anglo American <AAL.L>. []
AngloGold, which focuses on South Africa, produced 4.982
million ounces of gold last year.
"The very fact that Paulson has made this move is going to
prompt other hedge funds to look at why, and what the merits of
following that with similar purchases are," said Fairfax analyst
John Meyer.
"AngloGold is deep-level, higher-cost, quite highly
leveraged gold mining, with good liquidity and good scale," he
said. "(Paulson) clearly feel that gold is going to strengthen."
Among other precious metals, spot silver <XAG=> fell to
$12.38/12.44 an ounce from $12.70, tracking gold.
Spot platinum <XPT=> slid to $1,036/1,046 an ounce from
$1,043.50, while spot palladium <XPD=> ticked up to
$192.50/197.50 an ounce from $191.50.
Both metals, which are primarily used in car manufacturing,
have shed more than 50 percent of their value in the last year
as automakers cut back production amid dwindling sales.
Germany's BMW <BMWG.DE> said on Wednesday car markets will
drop as much as 20 percent this year. []
(Reporting by Jan Harvey; Editing by James Jukwey)
