(Repeats to clarify that two-month high in lead)
* Gold turns lower after strong data, Wall Street rally
* Gold's losses limited, signaling underlying support
* Biggest gold, silver ETF holdings increase
* Coming up: U.S. initial jobless claims due Thursday
(Recasts, updates prices to market close, changes byline,
dateline previous LONDON)
By Frank Tang
NEW YORK, Sept 1 (Reuters) - Gold turned lower on Wednesday
after an initial rally to a two-month of above $1,250 an ounce
fizzled, as strong U.S. manufacturing data boosted investor
appetite for riskier assets such as stocks, decreasing
bullion's appeal as an alternative investment.
Platinum group metals climbed on better economic sentiment,
as PGMs are largely consumed as catalytic converters by the
auto industry.
Gold in early trade rose as high as $1,254.65 an ounce,
about $10 below its all-time high at $1,264.90 set on June 21.
However, the metal struggled to maintain those gains as
investors worried the market may have run ahead of itself,
after data showed the U.S. manufacturing sector expanded for a
13th straight month in August. S&P 500 index rallied almost 3
percent. [] []
James Steel, chief commodity analyst at HSBC, said the fact
that gold held relatively firm in the face of a sharp
equity-market rally showed the bullion market is well
supported.
"Right now an increase in risk appetite has undermined
gold, whose safe-haven appeal has diminished but the market is
still well bid. It shows good underlying support for gold as
economic uncertainty remains in the background," Steel said.
Spot gold <XAU=> was at $1,244.25 an ounce at 1:53 p.m. EDT
(1753 GMT), from $1,248.99 late on Tuesday in New York. U.S.
gold futures for December delivery <GCZ0> settled down $2.20 an
ounce to $1,248.10.
Rising open interest in COMEX gold futures suggested prices
could rally to its record high, boosted by buying by funds and
institutional investors, analysts said.
"Comex open interest has started to improve, which is
good," said Simon Weeks, head of precious metals at the Bank of
Nova Scotia.
"But I would also like to see much more in the way of
investment coming in both in ETFs and in particular via cross
currencies as that will prove that gold is acting as a currency
in its own right."
On the investment side of the bullion market, holdings of
the major gold and silver exchange-traded products, which issue
securities backed by physical stocks of the precious metals,
rose on Tuesday, suggesting healthy investor interest.
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD>, added another 4 tonnes of metal
to its stocks.
The SPDR reversed July's outflows to record a monthly gain
in its holdings in August. Swiss bank UBS said gold holdings of
the 12 ETFs it tracks rose 1.38 million ounces in August.
The largest silver ETF, the iShares Silver Trust, also
increased its holdings by more than 30 tonnes. []
COMMODITIES, WALL ST BROADLY RISE
The wider markets showed better appetite for higher-risk
assets. Commodities rose broadly, with the Reuters/Jefferies
CRB index rose nearly 2 percent. Oil rose more than 3 percent
and base metals also rallied. [] []
Wall Street jumped on Wednesday as an increase in U.S.
manufacturing activity and new signs of growth in China and
Australia boosted investor confidence in the state of the
global economy.
China's manufacturing economy staged a moderate rebound in
August after slowing for several months under the onslaught of
government measures to rein in credit and deter property
speculation. []
Spot silver <XAG=> prices rose to their highest since
mid-May on Wednesday at $19.54, and was last at $19.34,
unchanged from Tuesday.
Platinum <XPT=> was at $1,529 an ounce against $1,516.40.
Palladium <XPD=> was at $517 against $496.70. The metal had
risen more than 6 percent to peak at $527.50, its highest since
mid-May, due to earlier strength in gold prices and weakness in
the dollar.
Prices at 2:10 p.m. EDT (1710 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1248.10 -2.20 -0.2% 13.9%
US silver <SIU0> 19.359 -0.039 0.0% 14.9%
US platinum <PLV0> 1535.70 12.20 0.8% 4.4%
US palladium <PAU0> 518.35 17.95 3.6% 26.8%
Gold <XAU=> 1244.40 -4.59 -0.4% 13.5%
Silver <XAG=> 19.34 0.00 0.0% 14.8%
Platinum <XPT=> 1532.50 16.10 1.1% 4.6%
Palladium <XPD=> 515.00 18.30 3.7% 27.0%
Gold Fix <XAUFIX=> 1246.50 -3.50 -0.3% 12.9%
Silver Fix <XAGFIX=> 19.47 60.00 3.2% 14.6%
Platinum Fix <XPTFIX=> 1531.00 3.00 0.2% 4.4%
Palladium Fix <XPDFIX=> 519.50 11.50 2.3% 29.2%
(Additional reporting by Jan Harvey in London;editing by
Sofina Mirza-Reid)
