* Stronger dollar a trigger for investor sales
* Physical market seen weak, more scrap on market
(updates prices, adds quotes)
By Pratima Desai and Rebekah Curtis
LONDON, Oct 16 (Reuters) - Gold dipped briefly to a one-week
low on Friday as investors favoured the dollar after Bank of
America <BAC.N> posted its second quarterly loss in less than a
year.
Spot gold <XAU=> was bid at $1,049.25 an ounce at 1530 GMT
from an earlier session low of $1,043.90 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 to sell."
Bank of America's results follow disappointing results on
Thursday from Goldman Sachs <GS.N> and Citigroup <C.N>.
"We're still in an upside trend on the (stock) market, but
it won't last unless we see companies' revenues starting to rise
again. And it's not the case for now," said Jacques Henry,
analyst at Louis Capital Markets, in Paris.
A higher dollar makes commodities priced in the U.S. unit
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. "I wouldn't be surprised
to see it back below $1,000."
STALLED
U.S. gold futures for December delivery <GCZ9> fell $6 to
$1,051.20 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 $17.42
an ounce from $17.32, platinum <XPT=> at $1,337 from $1,348.5
and palladium <XPD=> at $324.50 from $323.50.
(Additional reporting by Veronica Brown; Editing by Sue Thomas)
