* Dollar index gives up some gains made after U.S. data
* SPDR Gold Trust ETF holdings edge higher
* GFMS sees gold prices correcting before push higher
(Releads, updates prices)
By Jan Harvey
LONDON, Sept 15 (Reuters) - Gold held just below $1,000 an
ounce on Tuesday as the metal consolidated after its run up to
18-month highs late last week, supported by expectations of
fresh dollar weakness and rising inflation.
The metal briefly slipped towards $990 an ounce as the
dollar index <.DXY> climbed after data showed U.S. retail sales
grew more than expected in August, but recovered as the currency
pared gains.
Spot gold <XAU=> touched a low of $991.90, but was bid at
$998.30 an ounce at 1451 GMT against $998.65 late on Monday.
Standard Bank analyst Walter de We Wet said gold was
sensitive to the currency markets but that brief periods of
strength in the dollar did not detract from an overall trend
towards a softer U.S. currency.
"We expect the general trend to be towards more dollar
weakness, but we have seen so much weakness over the last three
weeks that a small correction cannot be ruled out," he said.
The dollar index, which measures the currency's performance
against a basket of six major currencies, pared gains after
climbing in response to the retail sales numbers, which boosted
hopes a recovery may be on the way. []
Dollar strength curbs interest in bullion as an alternative
asset and makes it more expensive for non-U.S. investors.
With the market needing fresh impetus for a push higher,
both the currency and physical markets are being closely eyed.
"We are now entering a period when gold is usually stronger
on a seasonal basis," said Peter Fertig, a consultant at
Germany's Quantitative Commodity Research.
"Typically the dollar is weak against the euro in the last
quarter, so seasonal factors are still arguing that this is just
a consolidation and that gold is likely to move further upwards
towards all-time highs."
CORRECTION EYED
In an update to its 2009 Gold Report, metals consultancy
GFMS said late on Monday that gold prices are likely to correct
after their recent run higher, but could rebound as high as
$1,100 an ounce in the next six months. []
"The market has been driven up very much by short term
speculation," said GFMS chairman Philip Klapwijk. "We've seen
net long positions on the COMEX reach record levels on the 8th
of this month and position length has only grown since then."
"On the other hand, I think the dollar is looking a little
bit oversold," he said. "I think we are going to see a fairly
significant correction take place in the gold price in the short
term."
Gold bugs were cheered by a 1.221-tonne rise in holdings of
the largest gold-backed exchange-traded fund, New York's SPDR
Gold Trust <GLD>, after five sessions of stability. []
They are also hoping for an increase in jewellery demand
from key markets such as India and the Middle East, which has
been weak this year as local gold prices in many areas rose.
Elsewhere U.S. gold futures for December delivery <GCZ9> on
the COMEX division of the New York Mercantile Exchange eased
$1.30 to $999.80 an ounce.
Among other precious metals, silver <XAG=> was at $16.76 an
ounce against $16.51 late on Monday. Platinum <XPT=> was at
$1,307 an ounce versus $1,313.50 and palladium <XPD=> at $289.50
versus $291.
(Reporting by Jan Harvey; Editing by Anthony Barker)
