(Updates with prices)
By Atul Prakash
LONDON, March 11 (Reuters) - Gold fell in the afternoon
session on Tuesday, as the dollar rose sharply after the U.S.
Federal Reserve announced new coordinated liquidity actions.
Gold <XAU=> fell as low as $964.35 and was quoted at
$972.90/973.70 at 1548 GMT, against $974.10/974.90 late in New
York on Monday. It rose to a record high of $991.90 on March 6.
"It's a reaction to the Fed announcement and the euro/dollar
move. It reflects that the Fed is taking care of the fears for a
liquidity crisis," said Michael Blumenroth, metals trader at
Deutsche Bank.
The dollar rose after the Fed announced global coordinated
measures to inject liquidity into the financial system, easing
concern about a deepening credit crisis and U.S. recession.
Before the Fed's move, markets were expecting the U.S.
central bank to reduce its benchmark interest rate from 3
percent to 2.25 percent at its next policy meeting on March 18.
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Oil fell from record highs near $110 a barrel.
"We have been battling here for quite a while now and if we
don't manage to see a prompt move towards $1,000, we might see
the market losing further momentum," said Frederic Panizzutti,
analyst at MKS Finance.
GOLD STRUGGLES
Gold has struggled to sustain the uptrend after a failure to
break through the $1,000 barrier last week. It has risen 19
percent in 2008, driven by record high oil and expectations of
further rate cuts in the United States.
"With persistent problems in the U.S. economy, rising crude
oil prices and fund investors chasing the metal, it's easy to
discern that gold is headed higher in the coming sessions," said
Pradeep Unni, analyst at Vision Commodities.
"But it is also crucial to remember that this over-extended
bull market is not devoid of a near term pull-back. In times of
sharp rally, markets have a tendency to slide on their own
weight, when the selling gets triggered."
In industry news, the World Gold Council chief executive
James Burton said the organisation was looking to cross-list its
New York-listed StreetTRACKS Gold Shares <GLD.P> <XAUEXT-NYS-TT>
fund in Japan and Hong Kong by September.
Gold held by StreetTRACKS, the world's largest gold-backed
ETF, hit a record high of 654.93 tonnes. Inflows have jumped 36
percent in a year, showing strong investor interest.
Spot platinum <XPT=> hit a high of $2,060 an ounce before
falling to $2,040/2,050, against $1,980/1,990 late in New York
on Monday, when it tumbled to a 4-week low at $1,926 on news
that miners in South Africa would get more power supply.
Supply concerns triggered by mining disruptions in South
Africa, the world's top producer, lifted platinum to a record
high of $2,290 on March 4. The metal, used in auto catalysts and
jewellery, has risen as much as 50 percent in 2008.
"Platinum remains very volatile. On the one hand, we have
positive news about the power supply and on the other, we have
some production cuts, which are going to further imbalance the
supply demand this year," said Panizzutti said.
South African power utility Eskom is in the process of
restoring power to 95 percent of normal levels to the mining
industry. []
Analysts say the global platinum deficit could widen to
500,000 to 600,000 ounces by the end of 2008, compared with
about 265,000 ounces in 2007. The market had a surplus of 65,000
ounces in 2006, following seven successive years of deficits.
Silver <XAG=> fell to $19.33 before rising to $19.59/19.64,
against $19.64/19.69 an ounce in New York, while palladium
<XPD=> rose to $485/490 an ounce from $467/472.
(Additional reporting by Anna Ringstrom in London)
(Reporting by Atul Prakash; editing by Peter Blackburn)
