* Gold futures rise in sympathy with late stock rally
* Receding inflation fears weigh on sentiment
* Investors opt for U.S. Treasuries over gold
(Recasts, updates prices, market activity; adds second byline,
dateline, previously LONDON)
By Frank Tang and Pratima Desai
NEW YORK/LONDON, Nov 13 (Reuters) - Gold futures rose
sharply in Thursday's screen trade as a late rally on Wall
Street and a tumbling dollar eased widespread liquidation
pressure in the bullion market.
The Dow Jones industrial average <> turned positive in
volatile trade after dropping as much as 300 points early.
Analysts said the stronger dollar and receding inflation
fears will cap bullion's gains in the near term.
In after-hours screen trade, U.S. gold futures for December
delivery <GCZ8> rose as high as $733.90 an ounce on the COMEX
division of the New York Mercantile Exchange. It settled down
$13.30, or 1.9 percent, at $705.00.
Spot gold <XAU=> was at $714.20 an ounce at 1:56 p.m. EST
(1756 GMT), up 0.5 percent from the close of $711.35. Earlier,
it touched a low of $700.25, the weakest since Oct. 24.
"Clearly, the pressure from deleveraging is the dominant
influence in the market. I suspect we will see another bout of
deleveraging into the beginning of December," said Bill
O'Neill, managing director of New Jersey-based LOGIC Advisors.
"Gold is a dollar-denominated commodity, and all
dollar-denominated metals and oil have been bludgeoned,"
O'Neill said.
The U.S. dollar fell against the euro after a more stable
performance by Wall Street stocks eased risk aversion. []
"Gold will struggle in an environment where the dollar is
strengthening," said Calyon analyst Robin Bhar.
"Safe-haven buying will continue to underpin the gold
price, but it looks as if people are more inclined to move into
U.S. Treasury bonds and bills."
Any move by investors into U.S. government bonds will boost
the U.S. currency, and a stronger dollar makes metals more
expensive for holders of other currencies.
The dollar has been rising since August as the U.S.
economic slowdown has spread across the globe. Gold prices have
tumbled by about 30 percent since hitting a record high of
$1,030.80 an ounce in March.
"We are revising our gold forecasts lower on Goldman Sachs
currency revisions as USD shifts are the dominant driver of
gold prices," Goldman Sachs said in a note. []
RECEDING INFLATION FEARS
Fading inflation fears also have dented gold, since
investors use the precious metal as a hedge against inflation,
which erodes the value of money.
"Inflation is no longer in the equation for the global
economy. People don't need to be protected from it," a
London-based trader said.
Chinese investors have piled into gold this year, with the
country's gold investment hitting 38.4 tonnes in the first nine
months against 24 tonnes for all of 2007. []
Platinum <XPT=> fetched $809.50, up 0.1 percent from
Wednesday's finish.
Prices of the metal used to make autocatalysts have plunged
about 65 percent since a record high of $2,290 hit in March.
The sell-off was trigged by collapsing auto sales and the
deteriorating outlook for the car industry.
Palladium <XPD=> fetched $212.50, up 1.2 percent from its
previous close, and silver <XAG=> at $9.04, down 2.7 percent
from Wednesday's close.
(Reporting by Frank Tang in New York and Pratima Desai in
London; Editing by David Gregorio)
