* 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)
By Pratima Desai
LONDON, March 23 (Reuters) - Gold held steady on Monday
caught between worries about the generally weaker dollar and
inflationary pressures and optimism revived by a 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 $949.80/951.00 an ounce at 1620 GMT,
down from $950.90 late in New York on Friday when it rose as
high as $966.70, the highest since Feb. 25.
"Neither forces are strong enough to pull it one way or the
other," said analyst Marc Elliott at UK-based Fairfax. "Whether
it would be...rising equities versus perceived long term risk
which has prompted continuing investment flows into gold," he
said.
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.
The U.S. plan sparked a rally in European and U.S. equities,
which is negative for bullion, coupled with a rise in the U.S.
dollar against the euro on lingering doubts by currency
investors about the Obama administration's plan to clean up bank
balance sheets. []
But the expectations of the U.S. dollar weakening further in
the longer term as the U.S. plans to buy long-dated U.S.
Treasuries and strong investment appetite helped bullion to
limit its losses.
"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,"
said Afshin Nabavi, head of trading at MKS Finance said.
THICK AND FAST
Many 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. []
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)
