(Recasts, updates with quotes, prices, market activity,
changes dateline to NEW YORK, pvs LONDON)
By Frank Tang
NEW YORK, March 7 (Reuters) - Gold erased initial gains to
finish lower on Friday as funds sold bullion for liquidity,
capping a volatile week which saw gold make several runs toward
$1,000 an ounce but was met with heavy resistance each time.
Platinum and palladium contracts also pulled back sharply
on U.S. recession fears in a broad-based commodities sell-off.
"Gold is having trouble here, as it bounced off the $990
area again. It was up sharply but ended lower at the end. To
me, it's very negative sign," said Leonard Kaplan, president of
Prospector Asset Management at Evanston, Illinois.
"It seems like people are getting out of everything because
the hedge funds that are long gold are having troubles in other
areas and they need to sell to raise cash," Kaplan said.
Gold <XAU=> rose as high as $988 an ounce in morning trade
but was at $972.60/973.40 by New York's last quote at 2:15 p.m.
EST (1915 GMT), against $976.20/976.95 late in New York on
Thursday, when it hit a record high of $991.90.
"Compared with what it has done before, gold has slightly
underperformed in the last week. My guess is that we are going
to see a few more days of sharp swings," said Stephen Briggs,
economist at SG Corporate and Investment Banking.
"There is a huge uncertainty in the market after these
massive gains we have seen this year. People are getting a bit
nervous of the logic of such high prices in an environment of
the U.S. remorselessly heading into a recession."
Gold has gained nearly 20 percent in 2008 as funds,
speculators and investors buy the precious metal on
expectations of further interest rate cuts in the United States
and record-high oil, which elevates its safe-haven appeal.
The dollar rebounded from record lows triggered by a
surprise contraction in U.S. payrolls as attention shifted to
moves by the Federal Reserve to ease tight liquidity
conditions.
Returns on U.S. holdings are eroding for foreign investors
and many see precious metals as hard assets that can protect
portfolios.
"I think we are in for a period of correction for a while
now. Gold will be in consolidation mode ahead of the Federal
Reserve meeting on March 18," said Simon Weeks, managing
director, precious metals, at Bank of Nova Scotia.
ETF INFLOWS
But investor interest in exchange-traded funds (ETFs)
remained strong, and some analysts said market sentiment was
bullish and gold was likely to gain.
New York-listed StreetTRACKS Gold Shares <GLD.P>, the
world's largest gold-backed ETF, showed gold holdings of 647.56
tonnes -- near a record of 652.56 tonnes in mid-January.
"In a bull market, strength begets strength and that seems
to the driving force behind the repeated attempt to breach the
$1,000 level," said Pradeep Unni, analyst at Vision
Commodities.
"With all fundamentals intact and bullish momentum ticking
consistently, gold should ideally continue to gain in the
coming days."
Platinum fell sharply for a second day to a three-week low
on news that mines in South Africa, the world's top platinum
producer, would get more electricity supply.
The South African government confirmed that it would let
mines increase power consumption to 95 percent from 90
percent.
Platinum <XPT=> was last quoted at $2,020/2,030 an ounce,
against $2,170/2,180 late in New York on Thursday. It hit a
record high of $2,290 this week on supply concerns.
Silver <XAG=> edged lower to $20.11/20.16 an ounce from
$20.15/20.18, its previous finish in New York, having reached a
27-year peak of $21.20 on Thursday.
Palladium <XPD=> fell to a 2-1/2 week low of $485/490 an
ounce from its Thursday U.S. close of $513/516 an ounce.
(Additional reporting by Atul Prakash in London; Editing by
Marguerita Choy)
