* Gold momentum slows after three-day rise; dollar sapped
* World stocks rise on encouraging U.S. economic data
* Recovery plays into base metals could cap upside
By Nick Vinocur
London, June 26 (Reuters) - Gold cut early gains on Friday,
losing some of its upward momentum after data showed U.S.
consumer confidence rose more than expected in June, paring the
metal's appeal as an insurance premium against uncertainty.
Earlier gold hit a two-week high above $948.20 per ounce --
last seen in mid-June -- with the dollar retreating against a
basket of currencies. The metal stood at $939.05 by 1525 GMT, up
from $938.55 quoted late on Thursday in New York.
Data released earlier showed U.S. consumers were slowly
regaining confidence in their economy [] and
personal income rose more than expected in the past month.
The data added steam to a rally in global stocks, with risk
appetite pushing the MSCI world equity index <.MIWD00000PUS> up
half a percent and pressing the dollar into a broad retreat.
Despite the brighter approach to risk, the weaker U.S. unit
made dollar-denominated gold cheaper for foreign investors.
Analysts said that the encouraging U.S. data had hampered
gold's rise, as the danger of fresh crises in financial markets
appeared less imminent.
"One of the reasons gold has been bought has been as an
insurance premium against inflation, or against systemic risk
from another camp of investors," said Peter Fertig, an analyst
with Quantitative Commodity Research. "At least for the latter
group, their need to hold gold has clearly been reduced."
RECOVERY PLAYS WEIGH
On supply, South Africa's Gold Fields Limited <GFIJ.J>
expected to beat guidance and increase production by 4 percent
in the fourth quarter of 2009. []
Inflows into gold-backed exchange-traded funds waned,
reflecting weak fundamental demand for gold from retail
investors and the jewellery market.
Holdings at the world's largest gold-backed exchange-traded
fund, SPDR Gold Trust <GLD>, fell 0.5 percent to 1,125.74 tonnes
as of June 25, down 5.5 tonnes from the previous business day.
[]
Higher base metal prices, which also reflects confidence in
economic recovery, could compel investors to switch out of their
gold holdings in favour of industrial metals, analysts said.
"I'm concerned there will be more appetite for other things,
and gold could get neglected if people want equities, energy and
industrial metals," said Robin Bhar, an analyst at Calyon.
"Next week is a new quarter, which could be associated with
fresh investment flows into plays on the recovery," he added.
Copper <MCU3> prices have risen 66 percent on the year,
while aluminium <MAL3> used in transport and packaging has
gained sharply over the past month. []
U.S. gold futures for August delivery <GCQ9> were at $940.5
an ounce by 1521 GMT, a slight rise on the day.
In other precious metals, spot silver <XAG=> firmed to
$14.12, against $14.01 quoted late in New York on Wednesday,
while platinum <XPT=> climbed to $1,195.50, against $1,184.50
and palladium <XPD=> strengthened to $243.50 from $242.00.
(Additional reporting by Chikako Mogi in Tokyo; editing by
Veronica Brown)
