* Equities, industrial commodities rally
* U.S. govt unveils plan to cleanse banks of toxic assets
* SPDR holdings hit a record 1,114.60 tonnes.
(Updates prices and comments)
By Pratima Desai
LONDON, March 23 (Reuters) - Gold came under pressure on
Monday, as the dollar firmed against the euro, but losses were
capped by rising equity and commodity markets on the back of a
new U.S. plan to cleanse banks of toxic assets.
In a bid to pull the world's biggest economy out of a deep
recession, the U.S. government fleshed out a plan it hopes can
purge banks of up to $1 trillion in toxic assets, which boosted
world stocks and oil prices. []
Spot gold <XAU=> was at $946.80/948.00 an ounce at 1358 GMT,
down from $950.90 late in New York on Friday when it rose as
high as $966.70, the highest since Feb. 25.
"Just a bit of long liquidation is taking place," said
Afshin Nabavi, head of trading at MKS Finance. "At the same time
all stock markets in Europe and U.S. are positive. The dollar's
a bit firmer, but I think gold holds up nicely around $946 an
ounce area."
The U.S. dollar rose against the euro after U.S. Treasury
Secretary Timothy Geithner said markets for banks'
non-performing assets are 'stuck' and that the government's
programs are intended to alleviate this. []
"Although this plan looks positive, I think the injections
are probably not so good for the dollar in the medium to long
term. So we have a better possibility of seeing gold above
$1,000 an ounce than below $900 an ounce," Nabavi said.
Equity markets and industrial commodities such as copper and
oil rallied as markets tried to price in the possibility the
crisis engulfing financial markets could at last be coming to an
end. [] []
Gold is used as a hedge against financial uncertainty and
against inflation, which is expected to take off because of the
vast amounts of money being piped into the global economy by
central banks and governments.
It is also used as an alternative currency to the dollar,
which tumbled last week on news of the U.S. plan buy long-dated
U.S. Treasuries.
THICK AND FAST
Many investors fearing wealth erosion from inflation and the
banking crisis have headed for the safety of gold-backed
exchange traded funds such as SPDR Gold Trust <GLD>, the world's
largest.
SPDR's holdings hit a record 1,114.60 tonnes as of March 20,
up 11.31 tonnes or 1 percent from the previous day. []
However, the gold market remains vulnerable to plans for
stimulus, coming thick and fast for some months now.
"We expect the possibility of further Fed action will
support the economic outlook and increase risk appetite over
time and potentially slow inflows into gold exchange traded
funds," Deutsche Bank said in a note.
Fading interest could take gold further away from the record
high of $1,030.80 an ounce hit in March 2008.
Prices of precious industrial metals also held firm on
expectations that a demand recovery could be in the pipeline.
Spot silver <XAG=> was bid at $13.70 an ounce from $13.72
late in New York on Friday, palladium <XPD=> at $207.50 from
$204.50 and platinum at $1,127 from $1,112.50.
Platinum used in autocatalysts has been hard hit by the
downturn in the auto sector in recent months.
But news that Abu Dhabi government-linked Aabar Investment
<AABAR.AD> completed a $1.82 billion capital hike after taking a
9.1 percent stake in Daimler <DAIGn.DE> had helped the mood in
the platinum market, traders said. []
"The investment means someone, somewhere thinks there could
be an end to all this," a London-based trader said.
Reinforcing that was Goldman Sachs, which raised its view on
the European auto sector to "attractive" on expectations that
the worst was over. []
(Additional reporting by Humeyra Pamuk; editing by James
Jukwey)
