* Gold down more than 1 pct on rising dollar
* Oil slips $1, SPDR holdings unchanged
(Updates prices)
By Lewa Pardomuan
SINGAPORE, Feb 19 (Reuters) - Gold dropped more than 1
percent on Friday after the U.S. Federal Reserve hiked its
discount lending rate to banks, sending the dollar higher and
dimming the appeal of bullion as an alternative investment.
But weaker prices could attract buying from the jewellery
sector and help gold resist pressure from declines in oil
prices, and supply worries after the IMF said it planned to
sell more bullion to raise money.
Spot gold <XAU=> was at $1,103.60 an ounce by 0610 GMT,
down $7.80 an ounce, having hit an intraday low of $1,098.55 an
ounce. It hovered nearly 10 percent below a lifetime high above
$1,200 an ounce struck in early December.
U.S. gold futures for April delivery <GCJO> fell $14.0 an
ounce to $1,104.70. During Asian trade on Friday, gold futures
dipped below $1,100 an ounce as the dollar rose to a 9-month
high against the euro.
"You have two stimulus measures working against gold here.
One is the currency impact, and two is the safe-have aspect
which has been a support for gold recently at the expense of a
firmer dollar," said Mark Pervan, senior commodities analyst at
ANZ in Melbourne.
"I'd say sentiment is neutral at the moment. You've got
pressure from a firmer U.S. dollar but support from, I think,
increased risk aversion," said Pervan, adding that markets were
still nervous about a debt crisis in the euro zone.
Debt default worries in Europe, mainly focused on Greece,
had pushed investors toward gold, sending the price of bullion
in euro terms <XAUEUR=R> to a record high above 825 euros an
ounce this week.
Investors use gold as a hedge against financial turbulence
and inflation. Gold generally has an inverse relationship with
the dollar.
The dollar rallied and the euro hit a nine-month low on
Friday after the Fed's move to raise discount rate stoked
expectations that it was moving towards tighter monetary
policy. []
The dollar index <.DXY> rose to its highest in eight months
but later trimmed gains after Fed officials said the move was
not a precursor to a rise in the benchmark rate and the market
was putting too high a probability on a rate increase this
year. []
"I think we are now looking at a temporary correction to
test lower levels," said Wong Eng Soon, an investment analyst
at Phillip Futures in Singapore.
"I am keen to watch the $1,050 level. It was the level
which India paid to buy 200 tonnes," said Wong, referring to
bullion India bought from the International Monetary Fund late
last year.
The IMF said it will soon begin phased sales of 191.3
tonnes of gold to the open market, a move that has called into
question demand for bullion from official sector buyers.
[]
The Fund said the sales, which are part of a programme
launched last year to boost IMF resources for lending, "will be
conducted in a phased manner over time" to avoid disruptions to
the gold market.
Other markets were hit by the Fed news, with U.S. crude
prices falling more than $1 to below $78 a barrel, while
Japan's Nikkei share average dipped 2.1 percent. [] []
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings stood at 1,109.424 tonnes
by Feb. 18, unchanged from the previous business day.
[]
Precious metals prices at 0610 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 1103.60 -7.80 -0.70 0.72
Spot Silver 15.76 -0.08 -0.51 -6.36
Spot Platinum 1502.50 -11.50 -0.76 2.42
Spot Palladium 425.85 -3.65 -0.85 5.02
TOCOM Gold 3267.00 32.00 +0.99 0.25
62189
TOCOM Platinum 4421.00 19.00 +0.43 0.91
11618
TOCOM Silver 47.10 0.40 +0.86 -8.90
885
TOCOM Palladium 1251.00 2.00 +0.16 7.38
236
Euro/Dollar 1.3472
Dollar/Yen 91.82
TOCOM prices in yen per gram. Spot prices in $ per ounce.
(Editing by Ed Lane)
