(Updates with quotes, prices)
By Anna Ringstrom
LONDON, March 19 (Reuters) - Gold tumbled nearly 6 percent
to a three-week low on Wednesday, as investors rushed to take
profits after a lower-than-expected U.S. interest rate cut and
as the dollar trimmed losses.
Other metals tracked gold, with platinum slipping more than
3 percent to a one-month low, silver falling over 7 percent to a
three-week low and palladium posting sharp declines.
Spot gold <XAU=> fell to a low of $942.30 an ounce and was
quoted at $947.20/948.10 at 1549 GMT, against $1,002.30/1,003.10
late in New York on Tuesday.
"The dollar has come off its lows against the euro and that
has seen gold weaken. Also, the fact gold has risen so fast this
year means it was bound for some profit-taking," said Daniel
Hynes, metals analyst at Merrill Lynch.
"I think it's just been a bit of long liquidation. It's
obviously a very complicated and fluid situation at the moment."
The dollar, which hit a 13-year low against the yen and a
record low against the euro on Monday, trimmed losses after news
that Fannie Mae and Freddie Mac were cleared to inject more
liquidity into the mortgage market.
Lower interest rates typically reduce the attractiveness of
the dollar, which in turn makes gold cheaper for holders of
other currencies and often lifts bullion demand.
At its record high of $1,030.80 on Monday, gold was up 23
percent this year from the start of 2008, as fears of inflation,
hopes of further rate cuts and U.S. financial concerns boosted
bullion buying.
But some analysts said the increasing threat of inflation
might support gold in the longer term.
"We will be back at $1,000 very soon. Dips like this will be
short lived, while we have such a positive outlook for gold. All
the drivers that have driven gold so high are still there,"
Hynes said.
The Fed on Tuesday slashed key rates by 75 basis points to
2.25 percent amid fears of a recession and a credit crisis.
Market expectations had been for a 100-basis-point cut.
"People were looking at a 1 percent cut and there was only
75 basis points, so there is disappointment," said Dan Smith,
analyst at Standard Chartered Bank.
Together with consensus-beating earnings reports from two
top investment banks, the Fed rate cut sparked a rally on Wall
Street on Tuesday, that warmed up risk appetite and prompted
investors to buy back the U.S. currency.
"Better numbers from Morgan Stanley than expected and
reassuring statements from Lehman and Goldman Sachs yesterday
have given people a better feeling about the cash crunch," said
Simon Weeks, managing director, precious metals at Bank of Nova
Scotia.
But stocks slipped in Europe and the U.S. on Wednesday.
"Gold will continue to flirt with the $1,000 marker until
after Easter, then it might get more exciting again," said Nick
Moore, metals analyst at ABN Amro.
"We should look at gold prices consolidating, and later in
the year advancing as inflation concerns persist ... and the
dollar weakness remains a major support."
In other metals, spot platinum <XPT=> fell as low as $1,890
an ounce and was last quoted at $1,890/1,900, against
$1,960/1,970 in New York on Tuesday. It hit a record high of
$2,290 on March 4.
Silver <XAG=> fell to $8.30/18.35 an ounce from $19.76/19.81
while palladium <XPD=> fell to $462/467 an ounce from $477/482.
(Editing by Atul Prakash)
