(Updates with New York closing prices, market activity)
By Atul Prakash
LONDON, March 11 (Reuters) - Gold prices reversed initial
gains to end lower on Tuesday as the dollar rose sharply after
global central banks announced plans to add liquidity to
financial markets.
Gold <XAU=> fell as low as $964.35 an ounce and was at
$971.00/971.80 by New York's last quote at 2:15 p.m. EDT (1815
GMT), ag`inst $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, a
metals trader at Deutsche Bank.
The dollar soared after the Federal Reserve announced new
measures to inject liquidity into the financial system, easing
concern about a deepening credit crisis and a 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 policy meeting next week.
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.
Higher crude oil prices helped gold to partially recover
early losses, as bullion is used as a hedge against inflation.
U.S. crude futures <CLc1> settled 85 cents higher to $108.75 a
barrel, after rising to an all-time high of $109.72 earlier.
"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, an analyst at MKS Finance.
The active U.S. gold contract for April delivery <GCJ8> on
the COMEX division of the New York Mercantile Exchange settled
up $4.20 at $976 an ounce.
GOLD STRUGGLES
Gold has struggled to sustain its upward trend 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, an 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 organization 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 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
$2,290 on March 4. The metal, used in auto catalysts and
jewelry, has risen as much as 50 percent in 2008.
South African power utility Eskom is in the process of
restoring power to 95 percent of normal levels to the mining
industry. []
Silver <XAG=> fell to $19.33 and was last at $19.63/19.68,
against $19.64/19.69 an ounce in New York on Monday , while
palladium <XPD=> rose to $486/491 an ounce from its previous
U.S. finish of $467/472.
(Additional reporting by Frank Tang in New York and Anna
Ringstrom in London; Editing by Walter Bagley)
