* Dollar falls vs euro after weak U.S. data
* India Jan gold imports plunge more than 90 percent
* Gold Fields sees output rising 14 pct in Q3
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, Jan 29 (Reuters) - Gold turned higher on Thursday as
the dollar gave up earlier gains to weaken against the euro,
boosting the precious metal's appeal as a currency hedge.
Spot gold <XAU=> climbed to $890.60/892.60 an ounce at 1514
GMT from $885.60 in New York late on Wednesday. Earlier it
touched a low of $868.10.
U.S. gold futures for February delivery on the COMEX
division of the New York Mercantile Exchange rose $2.50 to
$890.70 an ounce.
The dollar weakened after data showed sales of new U.S. homes
plunged by 14.7 percent in December. The numbers fuelled fears
of a deepening U.S. recession, analysts said. []
A softer dollar typically benefits gold, which is often
bought as a currency hedge, but the relationship has decoupled
in recent sessions as both benefited from a flight to safety.
"That is a very longstanding relationship," said Citi
analyst David Thurtell. "I would be surprised to see it break
down." He said a rise above $888 would set the metal up for
further gains.
The precious metal has fallen 4 percent this week from the
three-month high of $915.30 it hit on Monday. Prices eased on
Wednesday as the Chicago Board Options Exchange Volatility index
<.VIX> -- Wall Street's so-called fear gauge -- fell.
Asian stocks and the dollar climbed overnight as investors
took heart from U.S. Congress' headway on a $825 billion
stimulus package. []
U.S. President Barack Obama's plan cleared its first
Congressional hurdle, passing through the House of
Representatives, as the Federal Reserve eyed more extreme
measures to ease credit market strains. []
A three-day run higher in European equity markets also
pressured the metal.
However, those gains were reversed on Thursday as European
stocks fell 1.5 percent as banks retreated after a storming
rally the previous day. []
PLUNGE
Weakness in gold demand from traditional centres of
jewellery buying such as India, the Middle East and China was
also worrying traders, analysts said.
India's gold imports plunged by more than 90 percent to 1.2
tonnes in January, the Bombay Bullion Association said on
Thursday, due to high prices and ample stocks. []
Demand for gold has been buoyed by investment in
bullion-backed products such as exchange-traded funds.
The world's largest gold ETF, the SPDR Gold Trust, saw
strong inflows last week that took it to record levels, but its
holdings have been steady for the last three sessions.
"Investment demand has notably eased since the start of the
week as a result of stronger equity markets and subsiding risk
aversion," noted Commerzbank.
On the supply side, the world's number four gold miner, Gold
Fields <GFIJ.J>, said its output in the three months to December
rose four percent from the previous quarter, and predicted a
further 14 percent rise in the quarter to March. []
Meanwhile at the World Economic Forum in Davos, Peter Munk,
head of the world's biggest gold miner Barrick Gold Corp
<ABX.TO>, said he thought gold prices were likely to hit new
highs this year as the dollar weakened. []
Interest in gold as a safe haven is still expected to boost
investment demand this year, keeping prices steady in the face
of the global downturn that is expected to pressure other
commodities. []
Among other precious metals, silver <XAG=> edged down to
$11.93/11.99 an ounce from $11.95.
Demand for silver ETFs has also been strong, with holdings
of the largest, New York's iShares Silver Trust <SLV.A>, up 10
percent or 660 tonnes since Jan 1.
Platinum eased to $959/969 an ounce from $953.50 and
palladium <XPD=> was at $188.50/192.50 an ounce from $188.
(Editing by James Jukwey)
