* Spot gold slips <XAU=> as dollar gains traction <.DXY>
* Spectre of long liquidation casts shadow, $950 eyed
* SPDR Gold holdings <XAUEXT-NYS-TT> steady
(Adds quotes, updates prices)
By Veronica Brown
LONDON, Sept 29 (Reuters) - Gold slipped below $990 per
ounce on Tuesday, with the market struggling to consolidate
recent bouts of speculative selling as the dollar maintained its
edge over the euro, leaving the metal exposed to further falls.
Spot gold stood at $987.55 per troy ounce by 1201 GMT,
compared with $989.95 quoted late in New York on Monday. The
market hit a low of $984.70 last Friday -- a level not seen
since Sept. 10 -- some way off recent 18-month highs above
$1,020.
U.S. gold futures for December delivery <GCZ9> fell $5.30 to
$988.60 per ounce.
Gold prices have risen some 12 percent so far this year,
with the most recent leg higher driven by dollar weakness,
technical momentum and concerns about potential inflation, but
the weight of speculative long positions on the New York COMEX
futures market has proved overwhelming.
"The market has been overbought and speculators have
lightened positions. Volatility is rising and we're seeing a
test of short-term support levels," said Jan Carlsen at Saxo
Bank.
The non-commercial net long position -- buying to profit
from further gains -- in gold futures on the COMEX division of
the New York Mercantile Exchange stood at an all-time high of
236,749 lots for the week ended Sept. 22, figures from the
Commodity Futures Trading Commission showed. []
"These (long positions) make the metal vulnerable to the
downside, if upside momentum slows down further and weak longs
start liquidating," said Alexander Zumpfe, senior precious
metals trader at Heraeus in Germany.
OUT OF FAVOUR?
Currencies ran against gold on Tuesday, as the dollar rose
against the yen <JPY=> and euro <EUR=> -- making gold and other
commodities priced in the U.S. unit less attractive to non-U.S.
investors.
Market analysts say the dollar's firmer tone so far this
week has left gold exposed to weakness as the temptation to
clear out stale long positions may prove hard to resist.
Bullion rallied to an 18-month high of $1,023.85 an ounce
earlier this month, just a few dollars shy of the March 2008
record high of $1,030.80.
It fell below the key $1,000 mark last week on a bout of
heavy selling, prompted in part by an absence of physical buying
of gold due to near record-high prices.
If more selling emerges, technical support at $950 may be
under threat.
"A certain hesitancy has emerged amongst fast money to buy
gold ... due to fears of excess long positioning in COMEX,
concerns about the sustainability of both USD weakness, and the
broader trend of risk asset strength," UBS analyst John Reade
said in a note to clients.
"We continue to expect a deeper correction in gold and
silver in coming weeks," he added.
On the investment front, the world's largest gold-backed
exchange-traded fund, the SPDR Gold Trust <GLD>, said its
holdings stood at 1,094.107 tonnes as of Sept. 28, unchanged
since Sept 24. []
In other precious metals silver stood at $16.04 per ounce
<XAG=>, down from $16.14 quoted late in New York on Monday.
Spot palladium <XPD=> was bid at $286.00, flat from late New
York levels on Monday, while platinum <XPT=> was at $1,265.00,
down from $1,273.50.
(Additional reporting by Miho Yoshikawa in Tokyo; editing by
James Jukwey)
