* Firmer dollar seen capping gains
* Asian buyers, ETF investors likely to support prices
(Updates prices, adds comment)
By Veronica Brown
LONDON, April 7 (Reuters) - Gold prices rose 1 percent on
Tuesday as investors took advantage of a fall in prices to 2-1/2
month lows to buy into the metal, but a firmer dollar against
the euro weighed on sentiment.
Spot gold <XAU=> was up at $879.20/880.70 per troy ounce at
1449 GMT, against $868.80 late in New York on Monday, when it
hit a low of $864.30, its weakest since late January.
U.S. gold futures for April delivery <GCJ9> on the COMEX
division of the New York Mercantile Exchange rose $7.30 to
$878.80 an ounce.
"Gold's performance today is impressive, even more so given
that the dollar has strengthened," said Citi analyst David
Thurtell.
"Perhaps people who are keen on the whole gold story as a
safe-haven are thinking it hasn't been this cheap in a long
time."
The dollar rose on Tuesday as fears over the global banking
sector ahead of the U.S. corporate earnings season prompted
investors to abandon risky assets such as stocks in favour of
the U.S. currency. []
Gold prices are still down about 13 percent from an
11-month high above $1,000 hit in February. But analysts said a
dose of reality on the overall vulnerability of the global
economy could well see it topping the $1,000 mark again.
That was reinforced by metals consultancy GFMS, which said
gold may rise through $1,100 an ounce in 2009 as investment is
supported by fears over rising inflation, potential dollar
weakness and financial instability []
Falling bullion prices prompted India to buy some gold early
in the global session, raising hopes the world's largest
consumer could be looking for more during the wedding season,
dealers said. []
Though some traders said gold may have been oversold, the
metal remains vulnerable for now to any signs of investors
shifting money into other assets.
"Although investor sentiment remains positive towards the
metal, ETF flows have slowed and prices have been hit with
profit-taking," Barclays Capital said in a note.
"The surge in investment demand had offset the slowdown in
jewellery consumption but now prices remain dependent upon
either further investment demand inflows or resumption in
physical fabrication demand."
ECONOMY
In global markets, world stocks turned lower after data
showed the euro zone economy shrank more than previously
thought, fanning concerns about the impact on corporate profits.
[]
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,127.37
tonnes as of April 6, unchanged from April 3 and just below a
record 1,127.44 tonnes. []
Exchange-traded funds (ETFs), which back the securities they
issue with physical commodities, are a major element of demand.
In other metals, platinum prices <XPT=> rose to $1,162/1,170
per ounce from $1,140.50 late in New York on Monday.
Platinum got a boost from prospective investment demand
after news on Monday a unit of London's ETF Securities had filed
with the Securities and Exchange Commission to register platinum
and palladium trusts in the United States. []
"If approved (this) could trigger significant price gains
again, but is likely to see significant opposition from the
mining sector as well as industrial and auto users," James Moore
of TheBullionDesk.com said in a note to clients.
Palladium also firmed to $224.50/228.50 from $221 on Monday,
while silver <XAG=> slipped to $12.24/12.31 from $12.10 on
Monday.
(Additional reporting by Pratima Desai and Jan Harvey; Editing
by James Jukwey)
