* Gold stays negative as dollar rises after FOMC statement
* Dealers wary of liquidation on COMEX holdings
* Main consumer India buys gold during festive season
(Recasts, updates with Federal Reserve statement, comments,
market activity; previous dateline LONDON)
By Frank Tang
NEW YORK, Sept 23 (Reuters) - Gold turned lower on
Wednesday as a stronger dollar dampened the metal's status as a
hedge against the falling U.S. currency, even though the U.S.
Federal Reserve said it would keep key interest rates at record
lows.
The Federal Reserve Open Market Committee (FOMC) upgraded
its assessment of the U.S. economy, saying activity had picked
up after a severe downturn. This should provide a favorable
environment for the commodities sector.
The U.S. central bank kept key U.S. interest rates
unchanged, and said it would keep rates low for an extended
period. []
The precious metals initially received a boost as the
dollar fell to a one-year low against the euro. However, the
dollar turned higher amid a weakening equities market.
"If the dollar remains on the defensive because of the low
interest rate, then it is certainly supportive to gold," said
James Steel, chief commodities analyst at HSBC in New York.
"The Fed said that the U.S. recovery is underway, and that
is generally commodities friendly," he said.
U.S. December gold futures <GCZ9> were down $6 at 3:52 p.m.
EDT (1952 GMT) at $1,009.50 an ounce on the COMEX division of
New York Mercantile Exchange. Prior to the FOMC decision,
December settled down $1.10 at $1,014.40.
Spot gold <XAU=> was at $1,008 an ounce, down from
$1,013.80 quoted late in New York on Tuesday.
Bullion prices remained within striking distance of last
week's 18-month high at $1,023.85 and the March 2008 historic
peak at $1,030.80.
LIQUIDATION WARY
Analysts are mindful that a sharp price rally combined with
record high in noncommercial long positions in the U.S. futures
market could lead to a brutal bout of selling.
"If you add the ETF holdings to COMEX positioning at record
highs, I think that might be a concern," VM Group analyst
Matthew Turner said.
Last year, bullion lost more than $100 only a few days
after it powered to the record high.
"We continue to view gold and silver prices warily due to
large speculative long positions, although if the dollar
remains weak there will be no correction," UBS metals analyst
John Reade said in a note to clients.
Underlying support could be seen, as the physical sector
saw buying from main consumer India, but other consumers were
hesitant.
"India continues to buy but I guess other consumers are
quite cautious this time around. I don't think people dare to
cash in right now especially after the market has bounced back
from below $1,000," said a dealer in Singapore.
India's gold purchases have picked up as the festive season
gained steam in the world's largest consumer of bullion.
Among other precious metals, silver <XAG=> was at $16.80
per ounce, compared with $17.10 late in New York on Tuesday.
Platinum <XPT=> was at $1,322.00, down from $1,332.00 while
palladium <XPD=> was last at $292.00, compared with its
previous finish of $300.00.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1014.40 -1.1 -0.1 884.3 14.7
US silver <SIZ9> 16.910 -0.205 -1.2 11.295 49.7
US platinum <PLV9> 1327.80 -11.40 -0.9 941.50 41.0
US palladium <PAZ9> 297.65 -4.75 -1.6 188.70 57.7
Prices at 3:53 p.m. EDT (1953 GMT)
Gold <XAU=> 1008.05 -5.75 -0.6 878.20 14.8
Silver <XAG=> 16.80 -0.30 -1.8 11.30 48.7
Platinum <XPT=> 1322.00 -10.00 -0.8 924.50 43.0
Palladium <XPD=> 292.00 -8.000 -2.7 184.50 58.3
Gold Fix <XAUFIX=> 1010.25 -4.50 -0.4 836.50 20.8
Silver Fix <XAGFIX=> 17.10 -14.00 -0.8 14.76 15.9
Platinum Fix <XPTFIX=> 1325.00 8.00 0.6 1529 -13.3
Palladium Fix<XPDFIX=> 299.00 2.00 0.7 365.0 -18.1
(Additional reporting by Veronica Brown in London and Lewa
Pardomuan in Singapore; Editing by David Gregorio)
