* Dollar regains lost ground against the euro
* Crude oil slips lower after historic one-day surge
* SPDR Gold Trust bullion holdings hit record
(Adds comment, updates prices)
By Jan Harvey
LONDON, Sept 23 (Reuters) - Gold fell on Tuesday as lower
oil prices and a slightly firmer dollar prompted investors to
cash in the previous session's gains.
But with concerns remaining over the impact of the U.S.
government's proposed $700 bailout of the financial system,
analysts said gold could be poised to trend higher.
Spot gold <XAU=> was at $895.55/897.55 an ounce by 1424 GMT,
down from $900.20 an ounce at the nominal New York close on
Monday.
Commerzbank analyst Barbara Lambrecht said a combination of
profit taking and a firmer tone to the dollar was "putting
pressure on gold".
She added, however: "We think prices are well supported by
physical demand and by risk aversion, as people go into gold as
a safe haven."
The government's $700 billion rescue plan for the financial
sector initially cheered the markets, but pressured equities and
the dollar in later trade as investors worried about its
budgetary implications and doubted it would prevent recession.
While investors are taking the opportunity to book profits,
bullion is likely to trend higher once again if the market
remains volatile and the dollar fails to recover.
"Despite its high volatility, gold's safe haven qualities
are clearly attractive to investors, particularly in light of
expected weakness of the U.S. dollar," Fairfax analyst John
Meyer said.
For the moment, the dollar is consolidating against the euro
after the previous session's hefty falls. []
Earlier in the day, the U.S. currency reached session highs
against the euro after contracting euro zone manufacturing
activity focused attention on weakness in the euro area.
Gold's losses have mirrored those of crude oil, which
slipped more than $2 a barrel on Tuesday after a record one-day
rise in dollar terms in the previous session. []
Pricier crude tends to benefit gold because the precious
metal is bought as a hedge against oil-led inflation. Rising oil
prices also boost confidence in commodities as a whole.
ETF HOLDINGS GROW
Investment demand has been strong. The world's largest
gold-backed exchange-traded fund, the SPDR Gold Trust <GLD>, saw
a 30.2-inflow on Monday that brought its gold holdings to a
record 709.62 tonnes. []
Buying for ETFs, which issue securities backed by physical
bullion, represents a major source of demand for gold.
"We have seen a strong inflow into ETFs, which was a little
sluggish in the weeks before," said Barbara Lambrecht.
"Investment demand should give good support to gold."
UBS lifted its short-term forecasts for gold on Tuesday,
citing safe-haven buying and a weaker outlook for the dollar.
[]
The bank said it was increasing its one-month forecast for
spot gold to $925 an ounce from $850 previously, and it raised
its three-month forecast to $975 from $900.
Silver tracked gold lower, slipping 2.5 percent to a session
low of $13.07 an ounce. Spot silver <XAG=> was later at
$13.31/13.39 against $13.40.
Among other precious metals, spot platinum <XPT=> was
trading at $1,209.50/1,229.50 an ounce against $1,244.50, while
palladium <XPD=> edged down to $246/254 from $253.50.
"Both metals have lagged the moves in gold and silver, which
makes sense in an environment where risk aversion is a key
driver to the precious metals complex," said UBS analyst John
Reade.
(Reporting by Jan Harvey; editing by Christopher Johnson)
