* 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
0537 GMT, compared with the New York notional close of $937.10.
It earlier rose to $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 0.5 percent
to $942.1 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 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. []
Open interest in U.S. gold futures 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 0535 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 941.70 4.60 +0.49 6.99
Spot Silver 14.36 0.15 +1.06 26.86
Spot Platinum 1152.00 10.00 +0.88 23.61
Spot Palladium 232.50 2.50 +1.09 26.02
TOCOM Gold 2874.00 7.00 +0.24 11.70
18716
TOCOM Platinum 3533.00 1.00 +0.03 33.22
7139
TOCOM Silver 433.30 1.70 +0.39 35.70
140
TOCOM Palladium 720.00 -4.00 -0.55 30.91
190
Euro/Dollar 1.3773
Dollar/Yen 94.47
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Miho Yoshikawa)
