* Spot gold eases as profit taking continues
* SPDR Gold Trust holdings hit new record
* Investors cautious of testing $1,000 in near term
* Nikkei recovers on Citi report, weighs on gold
(Updates prices)
By Chikako Mogi
TOKYO, Feb 27 (Reuters) - Gold softened on Friday after
falling to a two-week low the previous day, as a budget offered
by President Obama gave a rosier outlook for the U.S. economy,
dampening the precious metal's safe-haven appeal.
With longer-term inflation fears easing slightly, investors
are taking profits, cautious of the market's ability to rally
and hold above the $1,000 level topped a week ago.
Spot gold was quoted at $939.40 per ounce at 0610 GMT, down
0.6 percent from New York's notional close of $944.70 on
Thursday, and also down from the 11-month high above $1,000
marked last Friday.
Gold fell about 5 percent in the previous four trading days
and is about 9 percent shy of the record high $1,030.80 struck
last March. Bullion is set to rise 1.3 percent this month
compared with January.
"It's more profit taking after the market rose above $1,000
a week ago," said Adrian Koh, a trader at Philip Futures.
"Investors are getting a bit more cautious about whether
the market will rally back above $1,030 in the near term."
A rebound in Tokyo share prices also provided a good reason
to sell gold and buy other assets.
The Nikkei <> gained 1.5 percent on Friday, boosted by
news of a likely agreement between the U.S. government and
Citigroup <C.N>. The Wall Street Journal reported that the U.S.
government will substantially increase its stake in the bank
and in return will demand a boardroom shake-up. []
[]
"Current gold market ranges are neither too bearish nor
bullish, and seem to be neutral for everybody," said an analyst
at a Japanese securities firm.
"The $1,000 level appears to have given a sense of
achievement, and as gold prices are getting higher, some
investors may be looking for other less expensive assets for
fund allocations," the analyst said.
Gold's allure was dented after Obama made his first
forecast since taking office that the U.S. economy will shrink
1.2 percent in 2009 before rebounding to 3.2 percent growth in
2010. []
Obama predicted on Thursday a $1.75 trillion deficit for
the 2009 fiscal year, the biggest U.S. deficit since World War
Two in a budget, underlining the heavy blow the recession has
dealt to the country's finances.
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings hit a record 1,029.29
tonnes on Feb. 26, up 0.31 tonne from Feb. 19. []
The spot gold market is likely to see a negative tone in
the near term as investors take a breather, with growth in SPDR
holdings moderating after repeatedly hitting records in the
previous two weeks, Philip Futures' Koh said.
In the longer run, gold would remain supported as investors
are unsure about the effectiveness of measures the U.S. and
other governments are taking to prop up their economies,
traders said.
But they said there should be a limit in funds flowing to
risker assets from gold, regarded as a safe-haven investment,
as long as there was no clear sign of a pick-up in global
demand.
Precious metals prices at 0620 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 940.30 -4.40 -0.47 6.83
Spot Silver 13.01 -0.09 -0.69 14.93
Spot Platinum 1046.50 -3.50 -0.33 12.29
Spot Palladium 194.00 0.00 +0.00 5.15
TOCOM Gold 2965.00 -54.00 -1.79 15.24
57843
TOCOM Platinum 3292.00 -19.00 -0.57 24.13
8781
TOCOM Silver 403.60 -22.30 -5.24 26.40
1005
TOCOM Palladium 616.00 -16.00 -2.53 12.00
385
Euro/Dollar 1.2730
Dollar/Yen 97.66
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Miho Yoshikawa; Editing by Ben Tan)
