* Investor demand tested as ETF buying stalls
* Support holds as financial and economic worries persist
* Prices seen capped at $900, supported around $865
(Recasts, changed dateline from TOKYO)
LONDON, April 23 (Reuters) - Gold edged up on Thursday,
extending gains from the day before as concern about the global
economy enhanced bullion's appeal as a hedge against market
uncertainty, and physical buying in India also provided support.
Gold <XAU=> traded at $892.5/894 per ounce at 0954 GMT from
$889.15 late in New York on Wednesday, up 0.4 percent. It rose
0.8 percent in the previous session.
But the market lacked momentum to push towards the key $900
mark, discouraged by stalling investment in the world's largest
gold-backed exchange-traded fund (ETF).
"For gold to be really moving on the upside you've got to
see more money coming into ETFs to justify that, and that has
not been the case for some weeks now," Simon Weeks, director of
precious metals at the Bank of Nova Scotia, said.
"I wouldn't say there's any more fresh demand coming in at
the moment."
Holdings of the SPDR Gold Trust <XAUEXT-NYS-TT> have stayed
at 1,105.98 tonnes, after investor outflows early this week
reached their biggest since early September. []
Some market players believe some funds may be looking at
U.S. Treasury yields for clues about whether to invest in gold
ETFs.
The benchmark 10-year U.S. Treasury yield <US10YT=RR> has
stayed mostly between 2.5 and 3 percent this year, after
plunging below 2.1 percent in late December as the global
financial crisis deepened.
A 44 percent surge in the SPDR's holdings since the start of
the year had helped underpin gold prices, but the last increase
was nearly a month ago.
Gold-backed exchange-traded funds saw inflows of 456 tonnes
in the first quarter of 2009, against a total 321 tonnes for the
whole of the previous year, the World Gold Council said on
Thursday. []
Gold last closed above $900 on April 2 and fell as low as
$864.00 on Friday, its lowest since Jan. 23.
DOLLAR WEAKER
A weaker dollar versus the euro also helped to support
bullion, analysts said, as a lower U.S. currency makes gold
cheaper for holders of other currencies. []
And buying from India ahead of the Akshaya Tritya festival
on April 27, an auspicious time for gold buying, continues to
lend support.
Signs of strains in the global economy helped lure investors
to shelter in gold. The International Monetary Fund on Wednesday
slashed its growth forecasts for every major country and urged
governments to take forceful action to ensure the world
economy's recovery from a severe recession. []
Distress in the U.S. banking sector continues, with Morgan
Stanley <MS.N> posting a wider-than-expected quarterly loss on
Wednesday and cutting its dividend. []
Among other precious metals, silver <XAG=> traded at
$12.42/12.48 an ounce, platinum <XPT=> was at $1,179/1,189 an
ounce and palladium <XPD=> traded at $230.5/233.5 an ounce.
"Should gold make a break lower, combined with base metals
under pressure, both platinum and palladium could see a sharp
decline in value," Standard Bank said in a note. "Auto demand
alone would not support the price."
(Additional reporting by Chikako Mogi in Tokyo; editing by Sue
Thomas)
