* Gold falls on Chinese equities rout, oil losses
* Positive link between gold, equities seen rising
* No. 1 iShares Silver Trust holdings down 1 pct last week
(Recasts, updates with quotes, closing prices, adds NEW YORK to
dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 31 (Reuters) - Gold futures trimmed
losses but still ended lower on Monday, as risk-averse investor
sentiment and a tumbling Chinese equities market prompted
selling in bullion and other commodities.
The positive link between gold and equities market has been
on the rise, as the metal is used as a hedge against inflation
and erosion of portfolio values.
"The markets today are focusing on China and the sharp
break of the Shanghai equities index," said Bill O'Neill,
managing partner of New Jersey-based LOGIC Advisors.
"In recent weeks, we noted the weakness in the equities, of
course, has had a positive relationship with commodities, and
that continued to be a factor," he said.
Global stocks fell on Monday, dragged by a six percent
tumble in China, which sent nervous investors into the yen for
safe haven. Wall Street was off about 1 percent in afternoon
trade.
U.S. December gold futures <GCZ9> settled down $5.30 at
$953.50 an ounce on the COMEX division of the New York
Mercantile Exchange.
Spot gold <XAU=> was at $951.70 an ounce at 2:03 p.m. EDT
(1803 GMT), against $954.45 an ounce late in New York on
Friday.
Weakness in oil prices, which fell over $3 to under $70 per
barrel, and a sharp rise of the yen against the dollar amid risk
aversion, are both weighing on gold. [] []
Afshin Nabavi, head of trading at MKS Finance, said price
volatility had also been exacerbated by holiday-thinned trade,
with the London market closed for the bank holiday.
Gold typically trades in a close negative relationship with
the dollar, as it is often bought as an alternative investment.
Like all dollar-priced assets, it also becomes cheaper for
holders of other currencies as the U.S. unit softens.
Meanwhile, a report that Chinese state-owned companies will
be allowed to walk away from loss-making commodity derivative
trades also struck a nerve among metals traders.
[]
James Steel, chief commodities analyst at HSBC in New York,
said that the news "played an element" in weighing down on
gold.
JEWELRY DEMAND IN FOCUS
The precious metal is taking little direction from
underlying demand or supply issues over the seasonally quiet
summer period, analysts said.
Frank Holmes, chief executive of U.S. Global Investors,
said that while gold has historically risen in the month of
September on the back of strong global jewelry demand, it could
be challenging this year due to the economic slowdown and the
high price of bullion.
Texas-based U.S. Global manages over $2 billion in fund
assets.
Silver, meanwhile, turned higher due to strong demand from
Asia, analysts said. Silver, which is a largely industrial
metal, has recently outperformed gold on the back of better
economic sentiment. []
Holdings of the world's largest silver-backed ETF, the
iShares Silver Trust <SLV>, also fell almost 82.6 tonnes, or 1
percent, last week. Spot silver <XAG=> was at $14.87 an ounce
against $14.74.
Platinum prices were a touch softer, pressured by a decline
in prices of industrial commodities such as oil. Platinum
<XPT=> was at $1,236 an ounce against $1,244, while palladium
<XPD=> was at $289 against its previous finish of $287.
Close Change Pct 2008 YTD
Chg Close Pct Chg
US gold <GCZ9> 953.50 -5.30 -0.6 884.30 7.8
US silver <SIZ9> 14.923 0.108 0.7 11.295 32.1
US platinum <PLV9> 1244.00 -1.90 -0.2 941.50 32.1
US palladium <PAZ9> 293.50 1.15 0.4 188.70 55.5
Prices at 2:01 p.m. EDT (1801 GMT)
Gold <XAU=> 951.30 -3.15 -0.3 878.200 8.3
Silver <XAG=> 14.88 0.14 0.9 11.30 31.7
Platinum <XPT=> 1235.50 -8.50 -0.7 924.50 33.6
Palladium <XPD=> 290.00 3.00 1.0 184.50 57.2
(Reporting by Frank Tang and Jan Harvey; Editing by Marguerita
Choy)
