* Dollar rebounds versus the euro after two-day sell-off
* Inflation view buoys gold after Fed plan to print money
* Platinum tracks gold up to near 6-month high
(Updates with quotes, closing prices, market activity)
By Jan Harvey
LONDON, March 20 (Reuters) - Gold edged down on Friday as the
dollar rebounded against the euro, prompting profit taking in the
precious metal after its rally to a three-week high earlier in the
session.
But prices are firmly underpinned by interest in the metal as a
haven from inflation and broad dollar weakness in the wake of the
U.S. Federal Reserve's move towards quantitative easing, which
increases money supply.
"The past two days' worth of upside puts us back in bullish
territory," said Alan Plaugmann, head of futures and options at Saxo
Bank. "There is some resistance at $958.50. A sustained break of
that level, and we could see some more upside."
Spot gold <XAU=> was at $952.90 an ounce at 2:56 p.m. EDT (1856
GMT), down 0.6 percent from its last quote $958.60 late on Thursday.
Earlier it hit a peak of $966.70 an ounce, its highest level since
Feb. 25.
U.S. gold futures for April delivery <GCJ9> settled down $2.60
at $956.20 an ounce on the COMEX division of the New York Mercantile
Exchange.
Prices have risen sharply since the Fed announced plans on
Wednesday to buy $300 billion in longer-dated Treasuries, flooding
the market with dollars. The move prompted a sharp drop in the U.S.
currency and an increase in inflation fears.
"When you look at the gold market, there is a huge dynamic in
place, which is an increasing loathing of currencies," said Nick
Moore, an analyst at RBS Global Banking & Markets. "The only true
currency, which is gold, is the beneficiary of that."
"If central banks around the world are keen to avoid deflation,
then by definition they must have inflation, and that plays straight
into gold's hands," he added.
Gold has benefited in recent days from a sharply weaker dollar,
boosting interest in the metal as an alternative asset.
The dollar is heading for its biggest weekly fall in 24 years,
although worries over the euro zone economy have pushed it higher on
the day versus the single currency. []
Investor interest in gold remains firm. The leading bullion
exchange-traded fund, the SPDR Gold Trust <GLD>, said a 15.28 tonne
inflow on Thursday had lifted its holdings to a record.
Buying of gold by ETFs, which back the securities they issue
with physical stocks of bullion, has formed a major plank of demand
in recent months. SPDR alone has added 323 tonnes of gold to its
reserves so far this year, against 17 tonnes a year ago.
EXCESS SUPPLY
Demand from ETFs is helping to mop up some of the excess supply
in the market left over from a drop-off in jewelry buying. Jewelers
in key markets such as India say the metal's sharp price rise has
hit sales hard. []
It has also led to a surge in supply of scrap gold as consumers
sell old or outdated jewelry to raise cash.
Among other precious metals, platinum rose to a near six-month
high of $1,127.50 an ounce, boosted by dollar weakness and strength
in the gold price.
The metal, chiefly an industrial commodity, may also benefit
from a shift in analysts' attention from a strongly recessionary
outlook in the wake of the Fed statement on Wednesday.
Spot platinum <XPT=> was at $1,112.00 an ounce, down 0.9 percent
from its previous close of $1,122.50, while spot palladium <XPD=>
was at $205.50 an ounce, up 1 percent from its late Thursday New
York quote $203.50. Silver <XAG=> was at $13.76 an ounce, up 1.4
percent from its Thursday finish of $13.57, tracking gold.
(With additional reporting by Frank Tang; Editing by Marguerita
Choy)
