* Stock markets climb at the U.S. open
* SPDR gold ETF sees no fresh inflows, holds Thursday level
(Updates, adds comment)
By Jan Harvey
LONDON, March 3 (Reuters) - Gold fell 2 percent on Tuesday
as waning inflows into exchange-traded funds and the metal's
failure to capitalise on falling stock markets fuelled fears its
rally may be at an end.
Spot gold <XAU=> was at $906.40/908.40 an ounce at 1544 GMT
from $925.35 late in New York on Monday. Earlier it touched a
three-week low of $905.10 an ounce.
U.S. gold futures for April delivery <GCJ9> on the COMEX
division of the New York Mercantile Exchange fell $32.40 to
$907.70 an ounce.
Traders were disappointed that the precious metal failed to
move higher after Monday's heavy stock market losses.
"Yesterday was the day gold should have moved higher, and it
didn't," said Afshin Nabavi, head of trading at MKS Finance.
"That has left a bit of a bad taste in investors' mouths."
Gold also failed to benefit after U.S. stocks opened higher
on Tuesday, with investors hunting bargains after Wall Street
fell to a 12-year low. []
Traders said they are also concerned about the tail-off in
ETF inflows, which were a key factor in pushing prices higher at
the beginning of the year.
But these stalled after the metal broke through $1,000 an
ounce last month.
The world's largest gold-backed ETF, the SPDR Gold Trust
<GLD>, said its holdings were 1,029.29 tonnes on Monday, steady
from Thursday and up only 5 tonnes in nearly a fortnight.
"Everyone is looking at the ETF numbers," said Deutsche Bank
trader Michael Blumenroth. "As long as there was money coming
into the ETFs, there was constant demand for gold.
"If this stops, we could see some medium term holders of
gold leaving the market," he said. "A continuation -- or not --
of buying of gold ETFs will be the most interesting point to
watch at the moment."
Traders are also keeping a close eye on the inflation
outlook. UBS strategist John Reade said gold moved higher from
mid-January as inflation expectations, as measured by spread
rates in treasury bond markets, recovered from lows.
SPREADS
"The fact that the recent correction in gold has been
accompanied by falling long dated...spreads should come as no
surprise," he said.
"We suspect the market is reacting to the much worse than
expected U.S. growth data and that the prospects of short term
deflation are now increasing again, outweighing minority-held
fears of much higher long-term inflation," he added.
The dollar recovered some losses against the euro after data
showed U.S. pending home sales fell and Federal Reserve Chairman
Ben Bernanke said more must be done to ensure financial
stability. []
A firmer dollar typically weighs on gold, though this
relationship has broken down in recent months as both assets
have reacted to risk aversion.
In India, the world's largest gold market, a 3 percent drop
in rupee-denominated gold failed to attract buyers. Sales have
suffered from rising prices.
"There is not much demand even as prices have fallen," said
Pinakin Vyaas, chief manager-treasury with IndusInd Bank in
Mumbai. "Orders are there... (but) in a range of $900/908."
The rising supply of gold scrap in Asia and the Middle East
as gold holders cash in on the metal's higher price is easily
meeting demand and depressing prices, dealers say.
Spot platinum <XPT=> eased to $1,034.50/1,044.50 an ounce
from $1,054, while palladium <XPD=> was at $188/192 an ounce
from $190.50. Spot silver <XAG=> slipped to $12.55/12.61 an
ounce from $12.91.
(Reporting by Jan Harvey; Editing by William Hardy)
