* US equities rise on upbeat retail news
* U.S. housing starts, permits unexpectedly rise in Feb
* SPDR gold ETF, Julius Baer gold ETF hit record levels
(Updates prices, releads, adds comment)
By Paul Lauener and Jan Harvey
LONDON, March 17 (Reuters) - Gold weakened on Tuesday as a
rise in Wall Street equities and a surprise surge in U.S.
housing starts reduced the precious metal's appeal as a haven.
However, fresh flows into exchange-traded funds showed
investors' appetite for bullion remained sharp, preventing
further falls.
Spot gold <XAU=> eased to $912.85/914.05 an ounce at 1641
GMT from $922.55 late in New York on Monday. U.S. gold futures
for April delivery <GCJ9> on the COMEX division of the New York
Mercantile Exchange fell $8.30 to $913.70 an ounce.
The market is looking ahead to the outcome of a two-day U.S.
Federal Reserve meeting ending on Wednesday, with investors
looking for measures that may stabilise the world economy,
reducing the investment appeal of gold. []
"The FMC statement is the next big thing," said the Bank of
Nova Scotia's director of precious metals Simon Weeks. "People
will be keeping a watchful eye out."
Equity strength continued to push gold prices down. U.S.
stocks rose on positive retail and technology news, with
sentiment underpinned by hopes that banks may be seeing some
stabilisation. []
The negative correlation between the S&P 500 and the gold
price has risen to more than 70 percent in the last month,
according to Reuters data, from around 30 percent in the last
quarter of 2008.
"A lot of upward pressure to the market was driven by risk
aversion," said BNP Paribas analyst Michael Widmer.
"There has been a bit of a rebound in the equity markets,
and financial stocks are performing a bit better in the United
States," he said. "That has taken some upward pressure off
prices."
Unexpected signs of life in the U.S. housing market, whose
collapse led to the current world economic downturn, are also
fuelling some optimism and taking further impetus from gold.
[]
Fears over economic and financial instability have boosted
inflows into gold and bullion-backed exchange-traded funds since
the beginning of the year. Latest data suggests that trend is
picking up again after running out of steam last week.
RECORD
New York's SPDR Gold Trust <GLD> said its holdings hit a
record 1,069.05 tonnes on Monday, while in Europe, holdings of
Julius Baer's <BAER.VX> gold-backed ETF rose 20 percent in the
week to March 17, also to a record. [] []
Higher prices, sustained in part by strong buying by ETFs,
have crushed the jewellery market.
"The (SPDR) fund is buying gold at the expense of the
jewellery market, which is seeing reduced buying activity," said
Fairfax analyst John Meyer.
Gold demand in the world's biggest jewellery market, India,
remained week, as traders anticipated lower prices, dealers
said. "Local demand is very bad," one trader told Reuters.
[]
The decline in jewellery buying, which typically accounts
for two-thirds of global demand, is also tempering gold prices,
analysts said.
Among other precious metals, spot silver <XAG=> dropped to
$12.65/12.71 an ounce from $12.89.
Platinum <XPT=> edged down to $1,044/1,049 an ounce from
$1,055, while palladium <XPD=> slipped to $193/198 an ounce from
$201.
Both metals are, unlike gold, primarily industrial in use
and have suffered from a slowdown in economic activity.
(Editing by Anthony Barker)
