* Spot gold recovers some poise, eyes on dollar
* Deeper correction in gold prices seen likely
* Gold vulnerable to long liquidation
(Recasts, adds comment, updates prices)
By Veronica Brown and Pratima Desai
LONDON, Sept 29 (Reuters) - Gold recovered from earlier
losses on Tuesday but analysts expect the generally higher
dollar to weigh on sentiment and possibly trigger a further
sharp sell-off.
Spot gold <XAU=> was bid at $990.10 a troy ounce at 1432 GMT
from $989.95 late in New York on Monday. Earlier it hit $984.90,
not far from Friday's $984.70, the lowest since Sept. 10.
Gold recovered some poise as the dollar slipped after an
unexpected fall in U.S. consumer confidence in September, but
overall the precious metal remains under pressure, analysts
said. [] []
That is because the U.S. currency since last week has mostly
been on an upward trajectory, making commodities priced in
dollars more expensive for holders of other currencies.
"Short term it's the dollar and not much else ... the dollar
has strengthened," said Robin Bhar, analyst at Calyon.
"These lower prices may rekindle some physical buying
interest ... The market is trying to find a base, which could be
at $960-$980 an ounce, but it really depends on physical and
investor interest."
U.S. gold futures for December delivery <GCZ9> were down
$2.4 to $991.7 per ounce.
Gold prices are up more than 10 percent so far this year,
with the most recent leg higher driven by dollar weakness,
technical momentum and concerns about potential inflation.
However, the weight of speculative long positions in New
York could prove to be its undoing.
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. []
"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?
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.
"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 dollar weakness and
the broader trend of risk asset strength," UBS said in a note.
"We continue to expect a deeper correction in gold and
silver in coming weeks.".
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 $16.13 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 $1,272, down
from $1,273.50.
(Additional reporting by Miho Yoshikawa in Tokyo; editing by
Anthony Barker)
