* Dollar recovers from one-year lows, pressuring gold
* Weak physical demand could trigger profit-taking
* Palladium touches fresh one-year high
(Recasts, updates quotes, prices, market activity, adds
second byline, NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Sept 18 (Reuters) - Gold ended lower on
Friday on profit taking, capping a volatile week in which the
metal had risen toward its all-time high $1,030.80 an ounce as
a steadily falling dollar boosted investment demand.
Yet, traders said that a lack of physical demand outside of
the investment sector could trigger further price weakness.
Jewelry buying, which typically accounts for more than half
of the total gold demand, has been lagging due to
near-record-high prices.
On Friday, gold was pressured as waning risk appetite cut
demand for high-yielding currencies, sending the dollar up
sharply against a basket of major currencies. A weakening
dollar has been powering gold's rise this week.
"(This) is more a dollar story than anything else," said
Eugen Weinberg, an analyst at Commerzbank. "As long as this
negative rally in the dollar continues, we will not see a trend
reversal in gold."
U.S. December gold futures <GCZ9> settled down $3.20 at
$1,010.30 an ounce on the COMEX division of the New York
Mercantile Exchange.
Spot gold <XAU=> was at $1,009 an ounce at 2:38 p.m. EDT
(1838 GMT), against its previous finish of $1,011.45.
On Thursday, dollar weakness lifted spot bullion to an
18-month high of $1,023.85 an ounce.
Saxo Bank senior manager Ole Hansen said given the momentum
gold has built up in its run towards record highs, significant
dollar strength would be needed to trigger a move lower.
"There has been a lot of buying into this -- speculative
longs are at a record high, ETF investments are at a record
high -- so we need to see the break above the highs from last
year," he said.
WEAK PHYSICAL DEMAND IN FOCUS
Miguel Perez-Santalla, vice president of sales at Heraeus
Precious Metals Management, said that the gold jewelry market
was "close to dead" compared with the same time a year ago.
Heraeus is also a processor and supplier of precious metals.
"There is no real physical buying outside of investment.
It's not a good sign in terms of the actual use of the
commodity," Perez-Santalla said.
Physical demand for gold in India, a key jewelry-buying
center, should re-emerge as traders stock up for the festival
season. Demand has been lackluster this year as high prices put
off buyers. []
Among other precious metals, silver, platinum and palladium
also edged lower after hitting multi-month highs on Thursday,
tracking gains in gold.
The three metals -- which unlike gold are largely
industrial in use -- are also benefiting from an improved
outlook for the global economy, which is fueling hopes rising
industrial production will cause an uptick in demand.
Palladium, which is used as a component in catalytic
converters, broke through $300 an ounce for the first time
since September 2008 on Thursday and hit a new one year high of
$304 an ounce early on Friday.
Palladium <XPD=> was last at $299.50 against $301.50 late
on Thursday, while platinum <XPT=> was at $1,327 an ounce
against $1,335.50. Silver <XAG=> was at $17 an ounce against
its previous finish of $17.18.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1010.30 -3.2 -0.3 884.3 14.2
US silver <SIZ9> 17.065 -0.200 -1.2 11.295 51.1
US platinum <PLV9> 1338.20 -3.30 -0.2 941.50 42.1
US palladium <PAZ9> 304.50 -1.25 -0.4 188.70 61.4
Prices at 2:39 p.m. EDT (1839 GMT)
Gold <XAU=> 1009.00 -2.45 -0.2 878.20 14.9
Silver <XAG=> 17.00 -0.18 -1.0 11.30 50.4
Platinum <XPT=> 1327.50 -8.00 -0.6 924.50 43.6
Palladium <XPD=> 299.00 -2.500 -0.8 184.50 62.1
Gold Fix <XAUFIX=> 1012.00 -2.00 -0.2 836.50 21.0
Silver Fix <XAGFIX=> 17.11 -27.00 -1.6 14.76 15.9
Platinum Fix <XPTFIX=> 1337.00 11.00 0.8 1529 -12.6
Palladium Fix<XPDFIX=> 304.00 4.00 1.3 365.0 -16.7
(Additional reporting by Jane Grieve in London; Editing by
Marguerita Choy)
