* Dollar lifts from lows vs euro after Bernanke testimony
* Oil climbs as world stocks hit 2009 highs
(Releads, updates prices)
By Jan Harvey
LONDON, July 21 (Reuters) - Gold steadied on Tuesday,
drifting off highs, as the dollar pared losses versus the euro
after Federal Reserve chair Ben Bernanke gave policymakers a
marginally less upbeat than expected view on the U.S. economy.
Oil prices lent support to gold, climbing nearly $1 a barrel
after world equities' rise to a 2009 high boosted hopes for an
economic recovery. Rising crude prices can fuel demand for gold
as a hedge against oil-led inflation. []
Spot gold <XAU=> was bid at $948.90 an ounce at 1446 GMT
against $948.35 an ounce late in New York on Monday, having
earlier touched a session high of $953.40.
U.S. gold futures for August delivery <GCQ9> on the COMEX
division of the New York Mercantile Exchange rose 50 cents to
$949.30 an ounce.
"The most noticeable change for gold has been the stronger
correlation with the dollar," said Standard Chartered analyst
Daniel Smith. "We went through a stage when the correlation was
negative and now it's pretty strongly positive."
The dollar pared losses against the euro <EUR=> after
Bernanke, in his testimony to the House of Representatives, said
job losses remain high and the Fed's accomodative monetary
policy could stay for an extended period. []
The testimony curbed risk appetite, diverting interest from
currencies seen as higher risk. Gold is often bought as an
alternative asset to the dollar and tends to move in the
opposite direction to the U.S. currency.
On the wider markets, world stocks hit nine-month highs as
traders anticipated more good news from corporate earnings
reports. []
INFLATION FEARS
A firmer tone to stocks and rising oil prices fuelled fears
over the prospect of inflation further down the line, which may
prompt fresh buying of gold.
French bank Calyon <CAGR.PA> forecast gold prices to average
$935 an ounce this year, rising to $975 in 2010 and $1,025 in
2011, with the price rise driven by dollar weakness and sharp
gains in inflation. []
"The two primary drivers we see pushing gold higher are a
weaker dollar... and massive injections by central banks of
liquidity to support economic growth," said Calyon metals
analyst Robin Bhar.
"This unconventional monetary policy is inflationary."
With physical demand for gold from both jewellers and
investors still sluggish over the seasonally weak summer months,
traders awaited fresh direction from the currency markets.
Gold prices in India, the world's largest bullion market,
were flat as dealers awaited lower prices. On the investment
side, holdings of the largest gold ETF, the SPDR Gold Trust
<GLD>, were unchanged on Monday. [] []
"When we get towards the end of August and September, we
will see physical demand picking up ahead of Diwali and the
wedding season," said Barclays Capital analyst Suki Cooper.
Silver <XAG=> was flat at $13.62 an ounce, platinum <XPT=>
was at $1,179.50 an ounce against $1,180, and palladium <XPD=>
was at $253 an ounce from $252.
South African miner Impala Platinum <IMPJ.J> said a shaft at
its Rustenberg mine will remain shut while an investigation into
an accident is carried out. All nine employees trapped by a rock
fall at the mine on Monday were killed, it said. []
Traders are awaiting the outcome of a dispute between South
Africa's National Union of Mineworkers and mining companies over
wages. Final talks are taking place on Tuesday. []
(Additional reporting by Pratima Desai; editing by James
Jukwey)
