* Stronger dollar a trigger for investor sales
* Physical market seen weak, more scrap on market
(Recasts, adds comment/detail)
By Pratima Desai and Rebekah Curtis
LONDON, Oct 16 (Reuters) - Gold slid to a one-week low on
Friday as investors piled into dollars after Bank of America
<BAC.N> posted its second quarterly loss in less than a year.
Spot gold <XAU=> was bid at $1,045.75 an ounce at 1159 GMT
from an earlier session low at $1,044.30 and compared with
$1,049.85 late in New York on Thursday.
Gold hit a record high of $1,070.40 an ounce on Wednesday as
buying momentum built up on the back of a falling dollar.
The dollar hit session highs against the euro after Bank of
America reported a net loss of $1 billion in the third quarter
of 2009 compared with net income of $1.18 billion over the same
period last year. [] []
"Gold is following the dollar very closely," said Andrey
Kryuchenkov, analyst at VTB Capital. "The market has run ahead
of itself and a stronger dollar is a trigger for to sell."
Bank of America's results follow disappointing results on
Thursday from Goldman Sachs <GS.N> and Citigroup <C.N>.
A higher dollar makes commodities priced more expensive for
holders of other currencies. That relationship has been
reinforced by gold's role as an alternative to the dollar.
Traditionally investors buy gold when they fear inflation or
financial market turbulence, but gold is seen as overvalued at
current levels and many investors are opting for U.S.
Treasuries, which means they have to buy dollars.
"Gold has been long overdue a correction on the downside.
It's lost momentum up here," said Simon Weeks, director of
precious metals at Bank of Nova Scotia.
"It could get back down to $1,010 and I wouldn't be
surprised to see it back below $1,000."
STALLED
U.S. gold futures for December delivery <GCZ9> fell 0.2
percent to $1,048.1 an ounce.
Underlining lacklustre investor interest at current high
prices, gold holdings by the world's largest gold-backed
exchange-traded fund, the SPDR Gold Trust <GLD>, have been flat
since Oct. 7.
SPDR holdings stood at 1,109.314 tonnes on Thursday, the
highest since early July but still off a record high of 1,134.03
tonnes marked on June 1 and 2. []
"Dollar weakness has stalled temporarily so people have used
that as an excuse to take profits," said Daniel Smith, analyst
at Standard Chartered. He added gold prices could average $1,140
an ounce in 2010.
"But there is quite a lot more weakness likely in the dollar
as we head into the year-end and that's going to add to the
upward pressure on gold."
However, some analysts expect gold to come under pressure
from weak physical demand because prices are too high.
"For the fourth quarter the physical market is not great at
this stage," Standard Bank analyst Walter De Wet said.
"There seems to be quite a bit of scrap coming through the
market which is adding to the resistance."
Among other precious metals, silver <XAG=> was bid at $17.22
an ounce from $17.32, platinum <XPT=> at $1,339 from $1,348.5
and palladium <XPD=> at $324 from $323.50.
(Editing by Veronica Brown)
