* Gold rally driven mainly by short-covering in futures
* SPDR gold ETF holdings <XAUEXT-NYS-TT> flat in past week
By Risa Maeda
TOKYO, May 21 (Reuters) - Gold rose for the third straight
day to hit a new eight-week high above $942 per ounce on
Thursday, buoyed by firmness in oil prices and the dollar's
recent slide to its lowest level in nearly five months.
But gains were mainly driven by funds buying U.S. gold
futures, resulting in arbitrage cash gold purchases, while a
rise in Asian currencies against the dollar capped the price of
gold denominated in regional currencies, traders said.
"It's up mainly because of short-covering in the market,"
said Ronald Leung, director of Lee Cheong Gold Dealers in Hong
Kong.
"The dollar is weakening again and the oil price is up,
which favours gold for a little while."
Spot gold <XAU=> rose 0.5 percent to $941.90 an ounce by
0315 GMT, compared with the New York notional close of $937.10.
It earlier rose as high as $942.75, its highest price since
March 26.
The dollar fell to its lowest level since January 1 against
a basket of major currencies on Thursday after the Federal
Reserve said it had considered buying more securities, raising
concerns the global financial system could be flooded with more
dollars. []
Crude oil <CLc1> stayed above $60 a barrel after
Wednesday's government data showed a steep drop in U.S. crude
and gasoline inventories ahead of the summer driving season.
[]
U.S. gold futures for June delivery <GCM9> rose 0.6
perceent to $942.90 per ounce from their Wednesday settlement
on the COMEX division of the New York Mercantile Exchange.
In Tokyo, yen-based gold futures posted narrower gains as
the yen rose to a two-month high against the dollar. A higher
yen deflates yen-based gold futures prices.
The key Tokyo Commodity Exchange gold futures contract for
April 2010 delivery <0#JAU:> rose 0.3 percent to 2,875 yen per
gram.
Similarly, physical buying by local players was limited as
they were less keen to buy due to the recent appreciation in
their currencies, traders said.
Looking ahead, data on net U.S. gold futures positions by
the Commodity Futures Trading Commission on Friday may provide
a clue about the sustainability of the current rally.
"Gold is moving up faster than many traders anticipated,
resulting in a chain of short-covering," said a trader at a
Japanese trading firm.
"We should check Friday's data to see how fast net long
futures positions are being built up."
The latest CFTC data showed net long noncommercial
positions rose 7 percent in the week to May 12. []
U.S. gold open interest has risen almost 20 percent so far
this year. Open interest, or the total number of futures
contracts that are not closed or delivered, is a measure of
liquidity and often an indicator of price direction.
[]
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said holdings stood at 1,105.62 tonnes
on Wednesday, unchanged since May 13. []
Precious metals prices at 0313 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 941.80 4.70 +0.50 13.10
Spot Silver 14.35 0.14 +0.99 -2.84
Spot Platinum 1152.00 10.00 +0.88 -24.21
Spot Palladium 232.00 2.00 +0.87 -36.96
TOCOM Gold 2875.00 8.00 +0.28 -6.05
16044
TOCOM Platinum 3531.00 -1.00 -0.03 -33.86
5924
TOCOM Silver 432.40 0.80 +0.19 -20.07
126
TOCOM Palladium 718.00 -6.00 -0.83 -46.85
90
Euro/Dollar 1.3793
Dollar/Yen 94.49
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Clarence Fernandez)
