* Euros loses 1 percent vs dollar, weighs heavily on gold
* Technical weakness triggered selling
* Physical gold demand remains weak
(Recasts, updates comment, closing prices, market activity,
adds NEW YORK byline/dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 26 (Reuters) - Gold prices fell to
their lowest level in more than two weeks on Monday, taking a
cue from currencies as the dollar jumped 1 percent against the
euro, with weak physical demand for the precious metal also
weighing.
A suddenly resurgent dollar prompted selling across asset
classes from equities to oil to other commodities. Profit
taking was cited as gold had rallied in the past two months as
the dollar steadily weakened.
"It's clearly dollar-euro related. I don't think many
people are surprised by the minor correction," said Bruce Dunn,
vice president of trading at New Jersey-based Auramet Trading.
Even with Monday's decline, gold has still risen 5 percent
in the past 30 days, and is up almost 20 percent year to date.
Technical selling in gold accelerated after prices broke
below support at the 14-day moving average, analysts said.
Spot gold <XAU=> was at $1,037.90 an ounce at 2:53 p.m. EDT
(1853 GMT), against $1,053.95 late in New York on Friday.
Bullion hit a low of $1,038.25 earlier in the session -- a
price last seen on Oct. 7.
U.S. December gold futures <GCZ9> settled down $13.60, or
1.3 percent, at $1,042.80 an ounce on the COMEX division of the
New York Mercantile Exchange.
"The relationship between gold and the dollar on a daily
basis is still very strong," said Daniel Major, analyst at RBS
Global Banking and Markets. "Since gold broke above $1,000, it
has outperformed the euro/dollar slightly, i.e. it moved up
faster than the dollar devalued, but for the last week or so it
seems to be consolidating."
The dollar rose 1 percent against the euro on Monday,
bouncing off 14-month lows after riskier assets, such as U.S.
stocks, fell. []
Strength in the U.S. currency makes gold less attractive
for holders of other currencies, as well as denting interest in
gold as an alternative asset.
While falls in stock markets usually boost gold's
safe-haven appeal, they have recently sent investors running
for the perceived safe haven of the dollar over that of gold.
"The gold price rally of the past weeks was largely the
result of a softer U.S. dollar. Without further USD weakening,
gold would lose one major price supporting factor ...,"
Commerzbank said in a note to clients.
"The physical demand in India has already weakened
significantly. Most recently, gold ETFs have not seen any
meaningful inflows of late. We continue to see the downside
risk of a price correction in gold."
WEAK DEMAND
Demand from jewelers and investors alike remained
relatively soft, weighing on gold.
"Investors and dollar doom-sayers may say gold could rise
higher, but physical markets are not at all in sync with that
view," said Richcomm Global Services senior analyst Pradeep
Unni.
Wholesale gold traders in India, the world's biggest
bullion consumer last year, said they were picking up some
bargains as prices retreated from record highs, but demand was
soft overall.
Among other precious metals, spot silver <XAG=> was at
$17.08 an ounce against $17.65.
In a note, Bank of America Merrill Lynch said silver prices
had benefited from strong investment demand, and that a
recovery in economic activity was likely to be reflected in
industrial silver buying.
Spot platinum <XPT=> was at $1,335.50 an ounce against
$1,358, while palladium <XPD=> was at $329.50 against $333.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1042.80 -13.6 -1.3 884.3 17.9
US silver <SIZ9> 17.095 -0.628 -3.5 11.295 51.4
US platinum <PLF0> 1345.80 -23.70 -1.7 941.50 42.9
US palladium <PAZ9> 333.25 -6.20 -1.8 188.70 76.6
Prices at 2:54 p.m. EDT (1854 GMT)
Gold <XAU=> 1037.95 -16.00 -1.5 878.20 18.2
Silver <XAG=> 17.09 -0.56 -3.2 11.30 51.2
Platinum <XPT=> 1335.50 -23.00 -1.7 924.50 44.5
Palladium <XPD=> 329.50 -3.500 -1.1 184.50 78.6
Gold Fix <XAUFIX=> 1054.00 -1.00 -0.1 836.50 26.0
Silver Fix <XAGFIX=> 17.61 -4.00 -0.2 14.76 19.3
Platinum Fix <XPTFIX=> 1364.00 5.00 0.4 1529 -10.8
Palladium Fix<XPDFIX=> 336.00 1.00 0.3 365.0 -7.9
(Editing by Walter Bagley)
