* Gold weakens on margin-call type liquidation in stocks
* Wall St. tumbles 2.5 pct, dollar soars, weighing on gold
* December futures running into resistance at 50-day MA
* Coming up: U.S. July consumer prices due Friday
(Recasts, updates prices to market close)
By Frank Tang
NEW YORK/LONDON, Aug 11 (Reuters) - Gold erased early gains
to trade flat 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.
An initial rally in gold fizzled as losses in the equity
markets deepened, which prompted 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 2.3 percent
against the euro and was headed for its best day in nearly two
years against a basket of major currencies as a gloomy U.S.
outlook and weak Chinese data suggested the world economy was
slowing. []
Spot gold <XAU=> was at $1,199.25 an ounce at 2:47 p.m. EDT
(1847 GMT), against $1,201.85 late in New York on Tuesday. U.S.
gold futures for December delivery <GCZ0> settled up $1.20 at
$1,199.20.
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.
On technical charts, December futures ran into key
resistance at their 50-day moving average around $1,215 an
ounce. In addition, the contract was trading below support
formed by a rising channel line dated back to late July.
(Graphic: http://link.reuters.com/ham54n)
OIL, COMMODS DOWN ON DOLLAR RISE
Among other commodities, oil prices fell more than 3
percent, and base metals such as copper also fell sharply on
the dollar's strength and worries over 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 $17.85 an
ounce against $18.25, while platinum <XPT=> was at $1,513.50 an
ounce against $1,539.50 and palladium <XPD=> was at $463
against $473.75.
Prices at 2:59 p.m. EDT (1859 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1199.20 1.20 0.1% 9.4%
US silver <SIU0> 17.902 -0.256 0.0% 6.3%
US platinum <PLV0> 1520.60 -16.40 -1.1% 3.4%
US palladium <PAU0> 464.70 -5.90 -1.3% 13.7%
Gold <XAU=> 1197.45 -4.40 -0.4% 9.2%
Silver <XAG=> 17.83 -0.42 -2.3% 5.9%
Platinum <XPT=> 1513.50 -26.00 -1.7% 3.3%
Palladium <XPD=> 463.00 -10.75 -2.3% 14.2%
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%
(Additional reporting by Jan Harvey in London; Editing by
David Gregorio)
