(Correcting in first paragraph to read European banks were
not strong enough, instead of strong enough)
* Gold tracks euro lower after stress tests meet view
* Gold to end down for second week; rangebound trade seen
* SPDR gold ETF holdings fall 6 T to six-week low
* Coming up: U.S. June new home sales due Monday
(Recasts, adds new comments, details, updates prices to
market close)
By Frank Tang
NEW YORK, July 23 (Reuters) - Gold fell on Friday with no
surprises to stir safe-haven demand but the metal largely held
its ground after stress tests showed seven European banks were
not strong enough to withstand another recession.
Analysts had expected five to 10 banks to fail the test. As
expected, no big banks failed the health check, but banks in
Germany and Greece were seen as weak spots and in need of
restructuring. [] []
James Steel, chief commodities analyst at HSBC, said
investors did not rush into gold, viewed as a safe haven in
times of economic uncertainty, because the test outcome has
already been factored into prices.
"I think this stress test has gone reasonably well
according to assumptions. So, we haven't had very much a flight
to quality buying in the gold market," Steel said.
After the stress tests results, the gold market largely
took its lead from the euro, which fell against the dollar on
worries the tests were not strict enough to reveal the true
health of the sector, traders said. []
Spot gold <XAU=> was at $1,187.05 an ounce at 2:54 p.m. EDT
(1854 GMT), against $1,195.35 late in New York on Thursday.
Earlier it climbed as high as $1,203.45 on economic optimism.
U.S. gold futures for August delivery <GCQ0> settled down
$7.80 at $1,187.80.
Gold was lower for a second straight week, as prices still
failed to break out of a broad range between $1,180 and
$1,220.
Earlier this week, gold challenged an important bullish
support line at below $1,180 an ounce, but the metal bounced
off support, which was seen as a natural entry point among
technical analysts.
Renewed sovereign credit risk, however, could provide fresh
incentive for gold buyers, said Bruce Dunn, vice president of
trading at New Jersey-based physical metal merchant Auramet.
"The market has been relatively quiet, so gold is going to
need a new catalyst to carry momentum to the upside again,"
Dunn said.
A stronger dollar against euro has pressured bullion this
week. The usual inverse relationship between gold and the
dollar too weakened at the start of the year as both benefited
from risk aversion during the sovereign debt crisis, but has
since shown signs of reemerging.
"As is typical with gold, relationships are changing," said
Societe Generale analyst David Wilson. "We've gone from a
positive correlation between gold and the dollar - both being
safe havens - to a negative one in the space of a few days."
Similar to gold, Wall Street showed a mute reaction to the
stress test, but stocks climbed 1 percent as solid corporate
earnings and a dividend hike by bellwether General Electric
boosted sentiment. []
PHYSICAL DEMAND SOFTENS
Demand for physical gold investment products including
ETFs, coins and bars has softened as concerns over financial
market stability have receded, analysts said.
U.S. Mint data showed the popular one-ounce American Eagles
gold coin sales was at 98,000 so far in July, a far cry from a
2010 high of 190,000 in May.
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, fell more than 6 tonnes
to a six-week low of 1,302.046 tonnes on Thursday. []
A Reuters poll of 55 analysts, traders and fund managers
released earlier this week showed an average forecast of $1,197
an ounce in 2010, rising to $1,228 next year. []
Gold is now looking forward to a number of key U.S.
economic indicators for trading cues, including the advanced
reading of the second-quarter GDP due Friday.
Among other precious metals, silver <XAG=> was at $18.08 an
ounce against $18.07, while platinum <XPT=> was at $1,539.50 an
ounce versus $1,521.10 and palladium <XPD=> at $465.50 against
$454.
Prices at 2:56 p.m. EDT (1756 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCQ0> 1187.80 -7.80 -0.7% 8.4%
US silver <SIU0> 18.101 -0.019 0.0% 7.5%
US platinum <PLV0> 1542.80 13.40 0.9% 4.9%
US palladium <PAU0> 466.75 9.85 2.2% 14.2%
Gold <XAU=> 1187.10 -8.25 -0.7% 8.3%
Silver <XAG=> 18.08 0.01 0.1% 7.4%
Platinum <XPT=> 1540.50 19.40 1.3% 5.1%
Palladium <XPD=> 465.50 11.50 2.5% 14.8%
Gold Fix <XAUFIX=> 1190.50 -8.25 -0.7% 7.8%
Silver Fix <XAGFIX=> 18.17 35.00 2.0% 6.9%
Platinum Fix <XPTFIX=> 1541.00 4.00 0.3% 5.1%
Palladium Fix <XPDFIX=> 460.00 2.00 0.4% 14.4%
(Additional reporting by Jan Harvey in London; Editing by
Sofina Mirza-Reid)
