(Updates with quotes, prices)
By Atul Prakash
LONDON, April 1 (Reuters) - Gold tumbled to a two-month low
below the key $900-an-ounce level on Tuesday as a dollar rise
against the euro dampened the metal's appeal as an alternative
investment and triggered bullion selling.
Falling oil prices also put pressure on gold, which is
traditionally seen as a hedge against inflation. Other metals
suffered losses, with silver slipping 5 percent to a two-month
low and platinum falling about 6 percent.
Gold <XAU=> hit a low of $872.90 and was at $877.80/878.70
an ounce at 1545 GMT, against $916.20/917.00 late in New York on
Monday, when it fell 2 percent. The metal has fallen about 15
percent since hitting a record high of $1,030.80 two weeks ago.
"Given the elevated level of speculative interest, we would
not rule out a deepening of the current correction in prices,"
said Suki Cooper, precious metals analyst at Barclays Capital.
"However, the overall environment for gold remains positive
over the forthcoming months," she said, adding the dollar was
not expected to rise markedly against the euro in the short
term, given the likelihood of poor U.S. data this week.
The dollar rose after Swiss bank UBS announced an additional
$19 billion of writedowns and Deutsche Bank said it expected to
write down a more than the forecasted $4 billion in the first
quarter, showing that credit problems were not limited to the
United States.
But the dollar registered its biggest quarterly loss versus
the euro in four years on Monday.
A report showed on Tuesday that U.S. factory activity
contracted for a second straight month in March. The market is
also waiting for Friday's jobs figures, which are expected to
show U.S. employers cut payrolls in March for the third straight
month.
OIL PRICES WEIGH
Weaker oil prices also dragged down precious metals. Oil
fell to near $100 a barrel, extending losses from the previous
session on selling by funds and a strengthening dollar, but
supported by expectations of a drop in U.S. gasoline stocks.
"Over the past couple of days, a firmer dollar and weaker
oil prices certainly weighed on the gold market and should do so
in the short term," said Daniel Hynes, metals strategist at
Merrill Lynch.
"We still believe that the outlook is strong and expect to
see a rebound, but for the moment those headwinds will keep any
gains relatively limited."
In industry news, Turkey's gold bullion imports fell in
March by 95 percent compared with February to their lowest-ever
monthly figure of 675 kg. Imports fell 13.2 percent year-on-year
in the first quarter to 32.3 tonnes. []
U.S. gold futures for June delivery <GCM8> on the COMEX
division of the New York Mercantile Exchange fell to $876.30 but
then recovered slightly to trade at 887.20, down 3.7 percent.
"Given gold's recent movements, the yellow metal will remain
vulnerable to selling pressure in the coming sessions,
particularly as the second quarter is traditionally weaker than
the first due to general market cycles," James Moore, analyst at
TheBullionDesk.com, said in a market report.
Platinum <XPT=> slipped to a one-week low of $1,888 an ounce
and was last at $1,895/1,905, against $2,005/2,025 in New York
late on Monday. It has fallen over 17 percent since hitting a
record of $2,290 on March 4, as a power crisis in top producer
South Africa hit output.
South Africa's state power utility Eskom was near a deal to
buy more electricity from Mozambique's Cahora Bassa development
to try to ease the problem, a Mozambican official said.
Silver <XAG=> fell to $16.32 and was last at $16.54/16.59 an
ounce, the lowest since early February, from $17.27/17.32 in New
York. Palladium <XPD=> fell to $421/428 an ounce from $438/443.
(Reporting by Atul Prakash; editing by Elizabeth Piper)
