* CFTC says to review gold, silver position limits
* Gold investors increase buying after CFTC announcement
* Platinum, palladium could divert gold ETF demand-analyst
(Recasts, updates CFTC position limits proposal, closing
prices, market activity, add NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 14 (Reuters) - Gold turned higher on
Thursday due to the dollar decline and as investors increased
buying after the U.S. futures regulator said it would review
possible position limits on gold and silver.
The chairman of the Commodity Futures Trading Commission
said that the agency's planned meeting in early March to
discuss possible position limits on metal futures and options
contracts will focus on gold and silver contracts.
Gold futures buying increased in a knee-jerk reaction to
avoid possible future measures by the CFTC to rein in
speculation in metals trading, dealers said.
The CFTC also unveiled long awaited proposals, as part of
the Obama administration's push to overhaul financial markets,
to apply to the four most-traded energy contracts on the two
major exchanges. []
Spot gold <XAU=> was at $1,141.20 an ounce at 2:31 p.m. EST
(1931 GMT), against $1,137.60 late in New York on Wednesday.
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the NYMEX settled up $6.20 at $1,143 an ounce.
U.S. crude and natural gas futures were little changed at
lower levels after the CFTC proposed to limit the role of big
traders in the volatile energy markets.
A review of possible position limits on the COMEX gold and
silver market should not affect prices because of the vast
physical spot gold market outside of the United States, traders
said.
Meanwhile, the euro cut losses against the dollar, and that
provided support to gold.
The common unit initially fell as European Central Bank
chief Jean-Claude Trichet highlighted the importance of a
strong U.S. currency. Euro late traded nearly unchanged against
the dollar.
"The euro-dollar rate is the main driver in the short
term," said Calyon analyst Robin Bhar. "Energy markets are also
off the boil... so there is a combination of factors at play."
SPDR GOLD TRUST STEADIES
Holdings of the largest gold-backed exchange-traded fund,
New York's SPDR Gold Trust <GLD>, were steady on Wednesday,
having declined nearly 18 tonnes since the New Year.
[]
Interest in platinum group metals-backed ETFs could detract
attention from similar products backed by gold, like the SPDR
fund, Goldman Sachs said in a research note.
"The gold ETFs may face increased competition for investor
demand in 2010 from the introduction of both the platinum
(PPLT) and palladium (PALL) PGM ETFs," the bank said.
"While these new physical-backed ETFs present a downside
risk to gold-ETF demand and gold prices, they represent an
upside risk to platinum prices, and we continue to recommend a
long position in platinum as a 'gold-plus' trade," it added.
Palladium rose more than 5 percent to an 18-month high on
Thursday, boosted by strong investment demand on the back of
the launch of the new palladium ETF.
Platinum also climbed nearly 2 percent on speculation the
ETFs could reduce the amount of the metals available to the
market this year.
Spot palladium <XPD=> hit a peak of $445.50 an ounce and
was last at $442.50 an ounce against $421.50. Platinum <XPT=>
hit a high of $1,612 an ounce, and was last at $1,607 against
$1,574. Silver <XAG=> was at $18.66 an ounce versus $18.59.
(Reporting by Frank Tang and Jan Harvey; Editing by Marguerita
Choy)
