(Recasts with quotes, prices, changes dateline, pvs TOKYO)
By Atul Prakash
LONDON, May 2 (Reuters) - Gold edged higher on Friday but
was weighed down by the dollar's recovery against the euro and
sharp declines in holdings of bullion exchange traded funds,
analysts said.
The metal <XAU=> has fallen nearly 18 percent from a record
high of $1,030.80 hit on March 17. It was at $854.60/855.60 by
1019 GMT after falling to $848.80, against $850.25/851.65 in New
York late on Thursday, when it hit a four-month low of $847.10.
"The $850 level, which is also 1980's record high, should
hold. But if it is broken convincingly, then the whole precious
metals complex might go down further," said Wolfgang
Wrzesniok-Rossbach, head of sales at Heraeus, a German precious
metals trading group.
"People are perhaps looking elsewhere, such as equities. It
seems gold is not the flavour of the day."
Gold held in New York-listed StreetTRACKS Gold Shares
<XAUEXT-NYS-TT>, the world's largest gold-backed exchange-traded
fund, fell to 580.45 tonnes as of Wednesday, shedding nearly 10
percent of its holdings in the last 10 days.
Bullion investors watched the dollar, which hit a two-month
high against the yen and was almost steady against the euro
after U.S. data the previous session reinforced expectations the
Federal Reserve will keep interest rates on hold for a while.
Data on Thursday showed manufacturing activity shrank less
than expected in April and consumer spending rose in March,
easing investor concerns about the depth of any U.S. economic
recession and making U.S. assets look more attractive.
"We believe that the dollar will be a less bullish factor
for gold in the coming weeks," Michael Widmer, metals analyst at
Lehman Brother said in a market report.
"The recent reduced price support has been exacerbated by a
seasonal weakening of demand. Against this fundamental backdrop,
we would not be surprised if gold prices remained weak in the
near term," he added.
JOBS DATA AWAITED
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Oil fell for the fourth day in a row, slipping below $112 a
barrel, pressured by a firm dollar, easing supply worries in
major crude exporter Nigeria, and concerns that demand in United
States will slow.
Investors awaited the monthly U.S. payrolls report later in
the session to see how sustainable the recent rally in the
dollar is likely to be.
"Weaker-than-expected statistics could possibly inject some
weakness in the dollar, which could see some short term
alternative investment fund flows into commodities," Standard
Bank said in a daily market report.
"We see further weakness in the commodity complex as
investors, gripped by uncertainty due to market volatility, will
look to consolidate their positions ahead of the weekend."
In other markets, U.S. gold futures rose, with the June
contract <GCM8> rising $5.90 an ounce to $856.70.
Platinum <XPT=> fell to $1,857/1,877 an ounce from
$1,860.50/1,880.50 late on Thursday, but palladium <XPD=> was up
at $406.50/414.50 an ounce from $406/414. Silver <XAG=> rose to
$16.27/16.32 an ounce from $16.16/16.22.
(Reporting by Atul Prakash; editing by Chris Johnson)
