* Gold falls below $850 after steep tumble late Thurs
* Bullion falls from $900 on hope for more Washington
action
* End-users, jewellery makers keen to buy dips
(Update prices, add comments)
By Chikafumi Hodo
TOKYO, Sept 19 (Reuters) - Gold edged down from highs on
Friday as the dollar and equities rallied after U.S. officials
scrambled to help mop up more of the toxic debt that has sunk
markets and triggered a flight from risk.
Bullion initially rose in early trading on Friday after
falling sharply from above $900 per ounce late the previous
day, but the precious metal lost ground as traders adjusted
positions ahead of the weekend after massive flight-to-quality
buying boosted prices this week.
Wall Street stocks jumped late on Thursday on news that
Washington was considering a more comprehensive solution to the
mounting financial crisis, news that sent gold tumbling from a
peak above $900 an ounce, its highest since Aug. 4.
Spot gold <XAU=> was trading at $842.10 per ounce by 0400
GMT, down $5.15 cents or 0.6 percent from Thursday's nominal
New York close of $847.25.
"Gold is clearly overshooting so we are seeing some selling
now, although the credit crisis is not over, so investors will
continue to seek safety from gold," said a senior trader at a
Japanse trading house.
Traders said investors from emerging markets, including
Russia and India, have been selling U.S. Treasuries amid fears
of more trouble for the U.S. financial sector and have been
using the proceeds from Treasuries to buy gold.
This week, U.S. authorities bailed out insurer American
International Group with an $85 billion rescue plan, Lehman
Brothers collapsed and Merrill Lynch got bought.
"Emerging market players hold large cash in their hands by
selling Treasuries," the trader said.
"I'm sure they have to cover losses in their own equity
markets, but they also need to allocate the remaining funds to
somewhere and that money is shifting to gold."
On Thursday prices soared as high as $902.60 on safe-haven
buying fuelled by fears that the financial crisis had not yet
run its course, but profit-taking kicked in late in the day as
the dollar erased losses and stocks rallied.
Rising U.S. equities and liquidity injection into the money
market by central banks, including the U.S. Federal Reserve,
the European Central Bank and the Bank of Japan, also tempered
gains.
U.S. Treasury Secretary Henry Paulson said on Thursday
night that he and congressional leaders were working on a plan
to "address systemic risks" in the U.S. capital market, with a
proposal expected in a matter of hours. []
That news, coupled with UK efforts to curb short selling of
banks and news that No. 2 investment bank Morgan Stanley was in
advanced talks to be bought by Wachovia, helped stem the rush
toward safe-haven assets, but investors remained anxious.
"Caution still stays and flight-to-quality buying in gold
is continuing," said Tatsuo Kageyama, an analyst at Kanetsu
Asset Management in Tokyo.
"But considering the speed of the rise, we could see some
technical correction, but on price dips there are plenty of
demand from end-users."
Spot gold surged by more than 10 percent or around $90, its
biggest one-day amount on record, on Wednesday and looked set
to nearly repeat that feat on Thursday until the late sell-off.
Kageyama said strong buying from investors in the Middle
East and Asia was detected when the cash price was below $800
and solid demand for gold exchange traded funds (ETFs) around
$850.
COMEX gold futures, which settled before the late-day
retreat in the spot market, dropped after rising 5.5 percent on
Thursday. The most active December contract <GCZ8> was trading
down $50.8 or 5.7 percent at $846.2 from the New York
settlement.
Benchmark August 2009 Tokyo Commodity Exchange (TOCOM) gold
futures <0#JAU:> was up 2.7 percent or 76 yen at 2,884 yen from
Thursday when they were pegged at 2,808 yen throughout the day
after rising by the daily 150-yen limit.
"The credit crisis won't go away easily, so we expect funds
to continue flowing into gold," Kageyama said.
"But the situation for other precious metals is different
and especially for platinum. The market is very concerned about
the demand outlook."
Spot platinum <XPT=> fell 2.2 percent or $23.50 to
$1,065.50 per ounce from late New York, having dipped on
Tuesday to a two and a half year low of $1,042 on weakening
auto sales and car makers slashing their production plans.
Precious metals prices at 0358 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 842.20 -5.05 -0.60 1.14
Spot Silver 12.01 0.17 +1.44 -18.69
Spot Platinum 1065.50 -23.50 -2.16 -29.90
Spot Palladium 227.00 -3.00 -1.30 -38.32
TOCOM Gold 2885.00 77.00 +2.74 -5.72
28956
TOCOM Platinum 3693.00 -31.00 -0.83 -30.83
7993
TOCOM Silver 409.70 7.60 +1.89 -24.27
801
TOCOM Palladium 803.00 -12.00 -1.47 -40.56
227
Euro/Dollar 1.4209
Dollar/Yen 106.98
TOCOM prices in yen per gram, except for silver which is in
yen per 10 grams, spot prices in $ per ounce.
(Reporting by Chikafumi Hodo; Editing by Clarence Fernandez)
