* Gold rises on uncertainty but near-term weakness seen
* GLD holdings post biggest 1-day outflow since April 2008
* Palladium rises 4 pct, biggest 1-day gain since May
(Recasts, updates prices to market close, adds comments,
changes byline, dateline, previous LONDON)
By Frank Tang
NEW YORK, July 29 (Reuters) - Gold rose on Thursday after
comments by top U.S. Federal Reserve officials stirred economic
uncertainty, but a sharp outflow in the world's largest gold
exchange traded fund signaled possible near-term liquidation.
Palladium, which is mostly consumed by the car industry as
an autocatalyst, rose 4 percent on a strong euro and
options-related buying, traders said. The metal posted its
biggest one-day percentage gain since late May.
COMEX gold open interest, an indicator of overall market
and fund trading activity, lost 4 percent on Wednesday, as
trading volume hit an all-time high, indicating investors are
moving out of the precious metal into equity markets.
[]
(Graphic: http://link.reuters.com/wav32n)
Bill O'Neill, partner of New Jersey-based commodity firm
LOGIC Advisors, said gold rose largely due to economic jitters
after comments by the two Fed officials, but the drop in
investment demand signaled prices could fall further.
"Gold is higher because we have some nervousness
surrounding other markets, but we could see speculative
liquidation as it (GLD tonnage drop) shows there is no
flight-to-safety type buying," O'Neill said.
SPDR Gold Trust <GLD>, often called GLD because of its
ticker symbol, posted its biggest one-day tonnage drop since
April 2008, as holdings fell 18.55 tonnes to 1,282.28 tonnes on
Wednesday.
Spot gold <XAU=> was at $1,168.10 an ounce at 3:17 p.m. EDT
(1917 GMT), against $1,162.55 late in New York on Wednesday,
when it hit a three-month low at $1,156.90. U.S. gold futures
for August delivery <GCQ0> settled up $8 at $1,168.40.
Gold prices have struggled to maintain higher levels since
hitting a record $1,264.90 an ounce in June, with investors
liquidating gold holdings in favor of other assets as equities
recovered some of the losses made earlier this year.
On Thursday, St. Louis Fed President James Bullard said he
is worried about the risks the United States could fall into a
Japan-style quagmire of falling prices, sending Wall Street as
much as 1 percent lower. []
Gold largely held its initial gains even as U.S. stock
markets recouped most of their losses in late sessions.
Bullion also benefited from comments by Dallas Fed
President Richard Fisher, who said any further monetary policy
accommodation from the Fed would have as little effect boosting
the economy as "pushing on a string." []
PALLADIUM AT HIGHEST SINCE JUNE
On the physical side of the market, traders reported good
buying for a fourth day in major gold consumer India, as they
stock up ahead of festivals on the subcontinent.
[]
However, investment demand for physical bullion in Europe
has softened as concerns over the stability of the financial
system recede. This is set to keep prices under pressure.
On the wider markets, the dollar weakened against the euro
<EUR=> to its lowest since early May. Sharper appetite for risk
is lifting the appeal of higher-yielding currencies. []
Palladium <XPD=> rose to its highest level since late June
at $488 an ounce and was last at $483.50 versus $465.93.
Traders cited a stronger positive correlation between
palladium and the euro. Heavy call-option buying in palladium
also boosted future prices, they said.
Silver <XAG=> was at $17.58 an ounce against $17.44, and
platinum <XPT=> was at $1,558.50 an ounce versus $1,531.75.
Prices at 3:31 p.m. EDT (1931 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCQ0> 1168.40 8.00 0.7% 6.6%
US silver <SIU0> 17.617 0.176 0.0% 4.6%
US platinum <PLV0> 1563.40 21.70 1.4% 6.3%
US palladium <PAU0> 491.20 22.45 4.8% 20.1%
Gold <XAU=> 1167.10 4.55 0.4% 6.5%
Silver <XAG=> 17.59 0.15 0.9% 4.5%
Platinum <XPT=> 1558.00 26.25 1.7% 6.3%
Palladium <XPD=> 483.50 17.57 3.8% 19.2%
Gold Fix <XAUFIX=> 1162.50 -3.50 -0.3% 5.3%
Silver Fix <XAGFIX=> 17.60 -3.00 -0.2% 3.6%
Platinum Fix <XPTFIX=> 1553.00 8.00 0.5% 5.9%
Palladium Fix <XPDFIX=> 488.00 15.00 3.2% 21.4%
(Additional reporting by Jan Harvey in London; Editing by
Sofina Mirza-Reid)
