* Fund liquidation, weak sentiment prompts selling
* Recovery from lows below $1,050/oz cheers chartists
* SPDR gold ETF sees first inflow of 2010
(Recasts, updates comments, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Feb 8 (Reuters) - Gold prices erased
initial gains to trade slightly lower on Monday, as technical
selling and fund liquidation amid uncertain economic sentiment
weighed on the metal.
Earlier in the session, bullion rebounded after it had
ended 2 percent lower last week as worries about the nascent
economic recovery and currency movements took a toll on
investor demand.
Zachary Oxman, managing director of California-based
TrendMax Futures, said that gold could face heavy liquidation
later this week due to liquidation pressure by funds after the
U.S. government proposed to limit banks' risk taking.
"We were oversold late last week, but there are still a lot
of economic worries out there" to send gold prices lower, Oxman
said.
Spot gold <XAU=> was at $1,064.85 an ounce at 3:41 p.m. EST
(2041 GMT) versus $1,065.55 late in New York on Friday.
U.S. April gold futures <GCJ0> settled up $13.40 at
$1,066.20 on the COMEX division of the NYMEX.
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Key technical levels for gold:
http://link.reuters.com/qyd48h
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Spot bullion had fallen further on Friday after the COMEX
settlement, and that explained the opposing directions between
the spot and futures markets.
On Friday, bullion had traded as low as $1,043.75, its
lowest since Nov. 2, as the euro fell on fears over the outlook
for some euro zone economies. The single currency's recovery on
Monday supported gold, though analysts are still cautious.
"We are probably not out of the woods yet," said Saxo Bank
senior manager Ole Hansen. "We are not ready to de-couple from
the dollar, so we continue to keep an eye on that."
Dealers said investors were disappointed a Group of Seven
ministers and central bank governors meeting this weekend did
not result in concrete action to tackle sovereign debt issues
in countries such as Greece, Portugal and Spain.
[]
Concern over the outlook for smaller euro zone economies
was a major driver of the sharp rise in risk aversion late last
week, which saw hefty selling of the euro and assets perceived
as higher risk, such as equities and commodities.
ETF HOLDINGS RISE
From a technical perspective, resistance near the $1,050
level held on Friday, preventing a move down toward the 200-day
moving average near $1,020 an ounce. A breach of this area
would lead to a sharper sell-off, analysts said.
[]
Gold's price drop prompted some fresh interest in the
metal, however, with the world's biggest gold-backed
exchange-traded fund, New York's SPDR Gold Trust <GLD>,
reporting its first inflow since December on Friday.
"There has been a bit of bargain hunting," said Credit
Agricole analyst Robin Bhar. "We fell to nearly $1,040 on
Friday, so that has seen a bit of trade interest and investor
positioning emerging, which has given a boost to the market."
Among other precious metals, silver <XAG=> was at $15.03 an
ounce from $15.11 an ounce, platinum <XPT=> at $1,471 from
$1,479.50 and palladium <XPD=> at $405 from $402.50.
ETF Securities Ltd has filed with the U.S. Securities and
Exchange Commission to start a precious metals basket trust,
which will be the company's fifth U.S. product. []
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCJ0> 1066.20 13.4 1.3 1096.20 -2.7
US silver <SIH0> 15.085 0.255 1.7 16.845 -10.4
US platinum <PLJ0> 1481.00 5.90 0.4 1471.00 0.7
US palladium <PAH0> 407.65 9.40 2.4 408.85 -0.3
Prices at 3:15 p.m. EST (2015 GMT)
Gold <XAU=> 1064.75 -0.80 -0.1 1096.35 -2.9
Silver <XAG=> 15.05 -0.06 -0.4 16.84 -10.6
Platinum <XPT=> 1476.00 -3.50 -0.2 1465.50 0.7
Palladium <XPD=> 404.50 2.000 0.5 405.50 -0.2
Gold Fix <XAUFIX=> 1064.00 -6.00 -0.6 1104 -3.6
Silver Fix <XAGFIX=> 15.14 -3.00 -0.2 16.99 -10.9
Platinum Fix <XPTFIX=> 1477.00 13.00 0.9 1466 0.8
Palladium Fix<XPDFIX=> 405.00 1.00 0.2 402 0.7
(Reporting by Frank Tang; Editing by Lisa Shumaker)
