* Gold falls on central banks' monetary tightening remarks
* Fed's Bullard urges reverse of monetary easing
* Underpinned by weak consumer confidence, home prices
* Coming up: U.S. ADP private-sector jobs report Wednesday
(Rewrites, updates with CPM report, comment, market
activity)
By Frank Tang
NEW YORK, March 29 (Reuters) - Gold fell for a fourth
consecutive session on Tuesday as signs of central banks'
monetary tightening prompted selling, but the metal was
underpinned by credit downgrades in Portugal and Greece and
disappointing U.S. consumer confidence.
Bullion's failure to capitalize on new record highs on
recent strong volume suggested some investors are skeptical
when central banks are about to rein in money supply to prevent
inflation.
"In the short term, any rhetoric on money tightening could
certainly cause some anxiety, resulting in gold prices
correcting a bit, but I continue to see a significant
underlying bid in gold as dips are being bought in the physical
market," said James Dailey, portfolio manager of the TEAM Asset
Strategy Fund. <TEAMX.O>
Spot gold <XAU=> dropped 0.1 percent to $1,417.46 an ounce
by 3:36 p.m. EDT (1936 GMT), having earlier fallen as low as
$1,410.85. U.S. gold futures for April delivery <GCJ1> settled
down 0.3 percent at $1,416.20.
COMEX gold futures were one of the most actively trading
commodity markets, with volume topped 250,000 lots, one of the
heaviest trading days year to date.
Dailey said that gold's failure to rise further on strong
volume is indicative of a significant amount of skepticism and
bearishness toward the metal in a healthy bull market.
Still, growing expectations U.S. and euro zone monetary
policy may tighten are weighing on gold prices, after Western
air strikes on Libya and political unrest across the Middle
East and North Africa pushed gold to a record $1,447.40 an
ounce last week.
"I think the market is beginning to believe that there will
be no QE3," said Saxo Bank senior manager Ole Hansen. "We have
geopolitical unrest, rising inflation, weaker dollar and all of
these have failed to make gold fly like last year."
St. Louis Federal Reserve chief James Bullard urged the Fed
to begin reversing its campaign of monetary easing, saying it
could trim its $600 billion bond-buying program by $100
billion, while ECB chief Jean-Claude Trichet said euro zone's
inflation rate was "durably" above the bank's target.
[]
Last November, the Fed initiated a $600 billion bond buying
program -- dubbed QE2 because it is the second round of
quantitative easing -- which is scheduled to end in June. Gold
has been a major beneficiary since the Fed has kept short-term
rates near zero since December 2008.
Also supporting gold was signs of a loss in momentum in the
U.S. economy, with consumer confidence fell in March as
households worried about inflation. In addition, Standard &
Poor's downgraded Greece and Portugal. []
[]
RATE HIKES EYED
The prospect of tightening monetary policy is casting a
shadow over the gold outlook. Gold tends to benefit from low
real interest rates, as they reduce the opportunity cost of
holding non-interest bearing bullion.
"We expect that the strengthening U.S. economy combined
with the end of quantitative easing by the U.S. Federal Reserve
will lead to gradually rising U.S. real interest rates in
2011," said Goldman Sachs in a report on Tuesday.
Gold demand to make jewelry, dental fillings and in
electronics will jump by more than 5 percent this year, the
biggest rise since 2000, metals research and consultant CPM
Group said on Tuesday. []
(Graphic on gold fabrication demand recovery:
http://link.reuters.com/sap78r)
Investment interest in products such as precious metals
exchange-traded funds has been soft this quarter, with holdings
of the largest gold ETF, New York's SPDR Gold Trust <GLD>, on
track for the biggest quarterly decline since the fund's
launch.
Holdings of the largest silver ETF, the iShares Silver
Trust <SLV>, are on track for a small rise, however, recovering
after posting their biggest ever monthly outflow in January.
Silver <XAG=> slipped 0.3 percent to $37.02 an ounce,
underperforming gold in its second straight session of losses.
Platinum <XPT=> dropped 0.4 percent to $1,738.24 an ounce,
while palladium <XPD=> gained 1.2 percent to $750.72.
Prices at 3:36 p.m. EDT (1936 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1416.20 -3.70 -0.3% -0.4%
US silver <SIK1> 36.987 -0.101 0.0% 19.6%
US platinum <PLJ1> 1740.60 -7.20 -0.4% -2.1%
US palladium <PAM1> 752.95 7.25 1.0% -6.3%
Gold <XAU=> 1417.46 -2.04 -0.1% -0.1%
Silver <XAG=> 37.02 -0.10 -0.3% 20.0%
Platinum <XPT=> 1738.24 -7.46 -0.4% -1.7%
Palladium <XPD=> 750.72 8.69 1.2% -6.1%
Gold Fix <XAUFIX=> 1417.50 3.50 0.2% 0.5%
Silver Fix <XAGFIX=> 36.62 0.00 0.0% 19.6%
Platinum Fix <XPTFIX=> 1745.00 0.00 0.0% 0.8%
Palladium Fix <XPDFIX=> 743.00 1.00 0.1% -6.1%
(Additional reporting by Jan Harvey in London; Editing by Lisa
Shumaker)
