* Gold weakens on margin-call type liquidation in stocks
* Wall St. tumbles 2.7 pct, dollar soars, weighing on gold
* Coming up: U.S. July consumer prices due Friday
(Recasts, updates prices, market activity; adds second byline,
dateline, previously LONDON)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 11 (Reuters) - Gold turned lower on
Wednesday as investors raised cash to cover heavy losses on
Wall Street, and as the dollar soared against the euro on
sharply lower risk appetite.
Gold erased initial gains as losses in the equity markets
deepened, prompting investors to sell assets across the board.
The S&P 500 index <.SPX> dropped 2.5 percent a day after the
Federal Reserve downgraded the outlook for the U.S. economy.
"There is a time when investors just sell off assets and
ask questions later rather than shifting over funds into safe
havens," said Tom Pawlicki, precious metals and energy analyst
at MF GLOBAL.
"When the stock market liquidates in a very quick fashion,
gold doesn't even benefit even though the safe-haven argument
is still valid," he said.
Also weighing on gold, the dollar rallied more than 2
percent against the euro as investors bought U.S. Treasury debt
as a safe haven. []
Spot gold <XAU=> was at $1,195.50 an ounce at 11:55 a.m.
EDT (1555 GMT), against $1,201.85 late in New York on Tuesday.
U.S. gold futures for December delivery <GCZ0> were down 20
cents at $1,197.80.
Spot bullion rose as high as $1,207.05 on Tuesday after the
Fed kept interest rates near zero and said it would use cash
from maturing mortgage bonds to buy government debt, keeping an
easier monetary policy in place longer than expected.
The Fed's announcement boosted gold initially as the dollar
weakened. []
"The initial reaction was a bit of a knee-jerk for both the
dollar and gold, so gold went up and the dollar went off," said
Credit Suisse analyst Tom Kendall. "And then this morning,
sentiment seemed to reverse."
MF Global's Pawlicki said gold could benefit in the long
term as an alternative asset if equity markets stayed weaker.
Also, low interest rates generally support gold, cutting the
opportunity cost of holding non-interest bearing assets like
bullion.
OIL, COMMODS DOWN ON DOLLAR RISE
Among other commodities, oil prices fell more than 2
percent, weighed down by strength in the dollar, while base
metals such as copper also slipped as the market mulled
economic and demand growth prospects. [] []
Overall, raw materials prices are being pressured by
concerns over the Fed's lackluster view on the U.S. economy.
This could support gold, however.
"Slower U.S. growth should lead to dollar strength against
most risky currencies," Barclays Capital said in a note.
"Such an environment is likely to prove to be favorable for
gold prices particularly given that the recent upside in prices
was driven by the resurgence in safe-haven buying," Barclays
added
Among other precious metals, silver <XAG=> was at $17.82 an
ounce against $18.25, while platinum <XPT=> was at $1,524.05 an
ounce against $1,539.50 and palladium <XPD=> was at $463.98
against $473.75.
Prices at 12:03 p.m. EDT (1603 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCZ0> 1197.20 -0.80 -0.1% 9.2%
US silver <SIU0> 17.865 -0.293 -1.6% 6.1%
US platinum <PLV0> 1530.60 -6.40 -0.4% 4.1%
US palladium <PAU0> 467.30 -3.30 -0.7% 14.3%
Gold <XAU=> 1194.95 -6.90 -0.6% 9.0%
Silver <XAG=> 17.85 -0.40 -2.2% 6.0%
Platinum <XPT=> 1524.05 -15.45 -1.0% 4.0%
Palladium <XPD=> 463.98 -9.77 -2.1% 14.4%
Gold Fix <XAUFIX=> 1205.50 7.50 0.6% 9.2%
Silver Fix <XAGFIX=> 18.12 3.00 0.2% 6.7%
Platinum Fix <XPTFIX=> 1540.00 6.00 0.4% 5.0%
Palladium Fix <XPDFIX=> 475.00 0.00 0.0% 18.2%
(Reporting by Frank Tang in New York and Jan Harvey in London;
Editing by David Gregorio)
