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By Frank Tang and Tamora Vidaillet
NEW YORK/LONDON, April 30 (Reuters) - Gold ended lower on
Wednesday, after dropping to a three-month low, as a
combination of a stronger dollar, weaker oil and a drop in gold
exchange-traded funds prompted selling for a second day.
However, bullion trimmed losses after hours in New York
following an interest rate cut by the Federal Reserve, which
did not signal it would refrain from further lowering the
federal funds rate.
Spot gold <XAU=> was at $866.50/868.50 an ounce by New
York's last quote at 2:15 p.m. EDT (1815 GMT), down from
$873.55/874.75 an ounce late in New York on Tuesday, but it was
up from a three-month low of $862.30 it touched earlier in the
day.
Gold held in StreetTRACKS Gold Shares <XAUEXT-NYS-TT>, the
world's largest gold-backed exchange-traded fund, dropped to
580.45 tonnes as of Tuesday, shedding nearly 10 percent of its
holdings in 10 days and taking a heavy toll on sentiment.
U.S. gold futures for June delivery <GCM8> on the COMEX
division of the New York Mercantile Exchange settled down
$11.70, or 1.3 percent, at $865.10 an ounce.
However, after Wednesday's close, the June contract turned
positive in volatile electronic trade after the Fed
announcement. It had traded as high as $880.80 an ounce.
"Financial markets remain under considerable stress, and
tight credit conditions and the deepening housing contraction
are likely to weigh on economic growth over the next few
quarters," the Fed said in a statement.
The U.S. central bank said that uncertainty about the
inflation outlook remained high, and it must monitor inflation
developments carefully.
"It's a bit supportive to gold, and I would say it's a bit
supportive to commodities in general, because there appeared to
be a real fear this was going to be a Fed meeting that will
clearly change the direction, but that did not happen," said
Bill O'Neill, managing partner at LOGIC Advisors in Upper
Saddle River in New Jersey.
"There was nothing definitive enough about it, and I really
don't think that their comments on inflation has that much
impact on gold," O'Neill said.
NEW CATALYST
Analysts revealed divisions in the outlook for gold prices,
with some expecting the metal to witness bursts of physical
demand following heavy price declines in recent weeks.
Gold has lost more than 15 percent in value since spiking
to a record high $1,030.80 on March 17, but the drop has
attracted physical buying from jewelers.
In the physical sector, jewelry makers from India to
Indonesia have snapped up purchases of bullion after it dived
to lower levels, pushing up premiums for gold bars in Southeast
Asia. []
Expectations of further declines in the dollar over the
coming three months should help support gold prices, said Suki
Cooper, precious metals analyst at Barclays Capital.
"I don't think we will see a dramatic rally in gold unless
a new catalyst emerges but the overall environment remains
quite positive, and physical buying emerging on price dips
should keep prices underpinned," she said.
Spot platinum <XPT=> fell to $1,917.50/1,937.50 an ounce
from $1,918/1,938 late on Tuesday in New York, while spot
palladium <XPD=> dropped to $413.50/421.40 an ounce from
$421/429 an ounce.
Silver <XAG=> was firmer at $16.80/16.88 an ounce, up from
its previous finish of $16.51/16.59 an ounce.
Strong investment buying and increased fabrication demand,
in spite of a drop in photography use, should propel the price
of silver higher, commodity research firm CPM Group said in a
report. []
(Additional reporting by Humeyra Pamuk in London and Lewa
Pardomuan in Singapore; Editing by Walter Bagley)
