* Gold trims losses after Greek credit downgrade
* SPDR gold ETF holdings steady at record 1,306.137 T
* Palladium rises 3 pct, more gains seen before year-end
(Updates prices, adds Moodys downgrade reaction, analyst
comments)
By Chris Kelly and Jan Harvey
NEW YORK/LONDON, June 14 (Reuters) - Gold settled lower on
Monday but rebounded in late business to bounce above $1,220 an
ounce, after another downgrade to Greece's credit rating
reawakened fears about excessive debt levels in several euro
zone countries. []
"If anything, it just sort of continues to refresh those
trends we have seen -- long dollar, long gold, short the
European currencies," said Zachary Oxman, managing director
with TrendMax Futures in Encinitas, California.
"Moody's coming out and reigniting the fire, so to speak,
is just going to remind everybody that this is not over yet,
and it's not getting any better right now. It is a reminder
that there are still a lot of problems out there."
Spot gold <XAU=> was bid at $1,222.15 an ounce at 1;41 p.m.
EDT (1741 GMT), down from $1,225.40 late in New York on Friday.
U.S. gold futures for August delivery <GCQ0> cut losses by
half, settling down $5.70 at $1,224.50.
The euro <EUR=> pared gains against the dollar after the
downgrade, but remained up over 1 percent on the day as
investor appetite for risk improved. The single currency
recorded its biggest weekly gain since September last week.
[]
A stronger euro, and consequently weaker dollar, would in
normal circumstances benefit gold. But in recent months the
relationship has inverted as bullion and the U.S. currency both
benefit from mounting risk aversion.
"I think we will be stalling here amid sluggish interest
and improving risk sentiment," said Andrey Kryuchenkov, an
analyst at VTB Capital. "In the long run all is good, but for
the moment some will be booking profits."
World stocks rose to their highest in over a week on Monday
due to optimism about the global growth outlook. European
equities reaching a four-week high, and U.S. equities also
rose. [] [] []
Other commodities were broadly higher, with oil prices up 1
percent and base metals strengthening. Coffee, sugar, cocoa and
grains also rose. [] [] []
While gold prices are coming under some pressure as risk
aversion eases, in the longer term wider economic concerns are
still supporting prices, analysts said.
"There are a lot of people who take a longer-term view,"
said Standard Bank analyst Walter de Wet. "Interest rates are
low, so for the next six to 12 months, conditions still favour
higher gold prices irrespectively of equity markets rallying."
GOLD ETF HOLDINGS AT RECORD
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, were steady at a record
1,306.137 tonnes on Friday. []
Investors still have an interest in holding gold in the
medium- to long-term to protect against potentially
inflationary government measures to service debt.
In a note on Monday, UBS said its economists had pushed
back their expectations for U.S. and euro zone rate hikes. Low
interest rates are positive for gold, because they cut the
opportunity cost of holding non-interest bearing assets.
"While we certainly see inflationary threats ahead through
the potential for the debt monetisation route, that time
horizon is some distance in the future," UBS said in a note.
"Instead, the reality this year of rising interest rates in
the U.S., in the absence of rising inflation or indeed
expectations, would not have been gold supportive. As such, our
forecast for a looser monetary policy environment provides a
positive backdrop to gold over the coming months."
Physical demand from gold's usual chief consumers, such as
India and the Middle East, has been dented by higher prices.
But in a Reuters interview, the vice chairman of the Gem
and Jewellery Export Promotion Council, Rajiv Jain, said Indian
gem and jewellery export sales were expected to rise by at
least 7-8 percent in 2011. []
Precious metals rose in line with other commodities.
Palladium <XPD=>, the biggest climber with gains of more than 3
percent, was last at $456.50 an ounce against $439, while
platinum <XPT=> was at $1,559 against $1,539.50.
Silver <XAG=> was bid at $18.37 an ounce against $18.18.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCQ0> 1224.50 -5.7 -0.5 1096.20 11.7
US silver <SIN0> 18.411 0.180 1.0 16.845 9.3
US platinum <PLN0> 1563.40 28.40 1.9 1471.00 6.3
US palladium <PAU0> 462.60 14.05 3.1 408.85 13.1
Prices at 1:48 p.m. EDT (1748 GMT)
Gold <XAU=> 1221.65 -3.75 -0.3 1096.35 11.4
Silver <XAG=> 18.37 0.19 1.0 16.84 9.1
Platinum <XPT=> 1559.00 19.50 1.3 1465.50 6.4
Palladium <XPD=> 456.50 17.500 4.0 405.50 12.6
Gold Fix <XAUFIX=> 1223.75 -5.75 -0.5 1104 10.8
Silver Fix <XAGFIX=> 18.43 12.00 0.7 16.99 8.5
Platinum Fix <XAGFIX=> 1556.00 1.00 0.1 1466 6.1
Palladium Fix<XAGFIX=> 457.00 1.00 0.2 402 13.7
(Editing by David Gregorio)
