* Wary of speculation about backing European fund with gold
* Players may be seeking new comfort zone at lower levels
(Adds quotes, Sydney dateline, updates prices)
By Chikako Mogi and James Regan
TOKYO/SYDNEY, March 15 (Reuters) - Gold held on to early
gains in late trading on Monday, shrugging off worries that
Europe's vast gold reserves could be used to aid troubled euro
zone states.
German magazine Focus reported on Saturday that the finance
ministry was considering the possibility of euro zone countries
using their central banks' gold reserves to back a European
Monetary Fund. []
A spokeswoman for Germany's central bank said on Sunday she
was unaware of any such plans and that the Bundesbank would
resist them if they did exist. []
Investment buying lifted gold about $6 on Monday, after
dropping below $1,100 per ounce on Friday to the lowest level
since Feb. 25.
"We're seeing some confidence returning to the market and
some sentiment that the price fell too much on Friday," a
bullion dealer in Perth said.
However, Kazuhiko Saito, chief analyst at Tokyo's Fujitomi
Co Ltd, believes gold prices are likely to be capped in the
near term given worries about European central bank selling.
He said big European countries such as Germany and France
each hold about 60 percent of their reserves in gold, and
market players were watching the outcome of a two-day meeting
of the European Union Economic and Financial Affairs Council
starting in Brussels on Monday.
"Investors are seeking a new comfort zone at a lower
level," he said. "Asian buyers continue to provide support
below $1,100, but they are also quick to sell on rebounds in
prices," he said.
Longer term, gold is unlikely to drop under $1,000 an
ounce, according to Westpac Banking Corp senior economist Huw
McKay.
"It is now being seen as the level at which any plunge in
the gold price will start to pull out of such a dive," he told
a meeting of gold miners in Perth.
Spot gold <XAU=> inched up 0.5 percent to $1,105.20 an
ounce as of 0630 GMT, against New York's notional close of
$1,099.50. U.S. April gold futures <GCJ0> were at
$1,104.90 an ounce, up 0.3 percent compared with $1,101.70 on
the COMEX.
Traders also said a series of central bank policy meetings
this week were making gold investors cautious.
The Federal Reserve is expected to repeat its promise to
keep U.S. borrowing costs exceptionally low for an "extended
period" when it concludes a policy-setting meeting on Tuesday.
[]
Noncommercial net long U.S. gold futures positions inched
up 0.4 percent to 208,194 contracts in the week ended March 9
from 207,372 contracts a week earlier, according to the weekly
Commitments of Traders report published by the Commodity
Futures Trading Commission. It was the highest in five weeks.
[]
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings stood at 1,115.511 tonnes
as of March 12, unchanged from the previous business day.
Holdings have stayed unchanged for three consecutive days.
[]
Precious metals prices at 0939 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 1105.40 5.90 +0.54 0.89
Spot Silver 17.01 -0.01 -0.06 1.07
Spot Platinum 1607.50 3.00 +0.19 9.58
Spot Palladium 458.00 -2.00 -0.43 12.95
TOCOM Gold 3232.00 3.00 +0.09 -0.83
2438
TOCOM Platinum 4670.00 16.00 +0.34 6.60
1183
TOCOM Silver 50.20 0.10 +0.20 -2.90
2
TOCOM Palladium 1325.00 -4.00 -0.30 13.73
2
Euro/Dollar 1.3738
Dollar/Yen 90.62
TOCOM prices in yen per gram. Spot prices in $ per ounce.
(Editing by Himani Sarkar)
