* Investors await U.S. payrolls data for direction
* Dollar inches up against a basket of currencies
* SPDR Gold holdings <XAUEXT-NYS-TT> steady
(Recasts, updates prices and comments)
By Humeyra Pamuk
LONDON, Oct 2 (Reuters) - Gold inched down on Friday, but
remained within striking distance of the key $1,000 an ounce as
the dollar edged up against a basket of currencies and the
market held its breath ahead of the U.S. payrolls data.
Traders said the market was vulnerable to the downside due
to a heavy build up of long positions and after bullion failed
to stay above $1,000 an ounce.
Gold <XAU=> was at $996.10 an ounce at 1124 GMT, compared
with $998.50 an ounce on Thursday. Bullion rose to an 18-month
high of $1,023.55 an ounce in September, a tad lower than its
record high of $1,030.80 an ounce, struck in March 2008.
"The market's primarily driven by the dollar," said Ole
Hansen, senior manager at Saxo Bank, adding the activity was
subdued with investors awaiting key U.S. payrolls data, due at
1230 GMT. []
If non-farm payrolls come in weaker than the expected
180,000 job losses, it could renew fears about recovery in the
world's largest economy and bolster the dollar, seen as a safe
haven. []
Gold is often viewed as an alternative to holding the dollar
and benefits from weakness in the U.S. currency, which makes it
more affordable for those buying in other currencies.
"Should the pace of payroll losses have declined a bit in
September as our economists expect, this could push gold back
above $1,000, because there has recently been a negative
correlation between the gold price and risk aversion,"
Commerzbank said in a research note.
In addition, the heavy long positions built up in the market
made bullion vulnerable to a correction, traders said. "My
feeling is any uptick at the moment is a sell opportunity
because the market is still pretty long," Hansen said.
The non-commercial net long position in gold futures on the
COMEX division of the New York Mercantile Exchange stood at an
all-time high of 236,749 lots for the week ended Sept. 22,
figures from the Commodity Futures Trading Commission showed.
U.S. gold futures for December delivery <GCZ9> were at
$999.5 an ounce, versus Thursday's $1,000.7 on the COMEX
division of the New York Mercantile Exchange.
HEAVY LONGS
"We would look for gold to hold the $985-1,020 area but gold
remains at risk to a deeper correction as falling risk appetite
could spook some of the recently added fund longs," said James
Moore at Thebulliondesk.com in a research note.
Moreover, several traders said there was insufficient
support for gold from the physical side.
"Supply and demand fundamentals are capping the gold price.
Scrap is becoming more available and jewellery demand goes down
every time the price goes up," said Tony Parry, a gold analyst
at Sydney-based Resource Capital Research.
The economic downturn and high prices this year have knocked
down demand for gold in Turkey, one of the top consumers of
bullion, which is now heading for the lowest ever recorded
annual import levels.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,095.327
tonnes on Oct. 1, unchanged from the previous business day.
[]
Among other precious metals, silver <XAG=> was lower at
$16.20 from $16.32
Platinum <XPT=> was at $1,268 from $1,277.5 and palladium
<XPD=> was at $289 from $287.50
(Reporting by Humeyra Pamuk, Editing by Sue Thomas)
