* Dollar rallies as central banks to cut emergency lending
* Technical resistance at $1,020/oz prompts selling
* Traders says gold sell-off a healthy correction
(Recasts, updates prices, market activity; adds second
byline, dateline; previously LONDON)
By Frank Tang and Rebekah Curtis
NEW YORK/LONDON, Sept 24 (Reuters) - Gold fell to a
two-week low in heavy trade on Thursday, slipping below $1,000
an ounce as the dollar rallied amid a wave of risk aversion,
decreasing the appeal of gold as a currency hedge.
Gold prices tumbled in a sell-off triggered by the dollar's
rise after major central banks including the U.S. Federal
Reserve announced plans to scale back emergency lending.
On Tuesday, gold was trading at $1,020 an ounce, within
sight of last week's 18-month high of $1,023.85 and the March
2008 historic peak at $1,030.80.
"We went into a lot of resistance at $1,020 an ounce.
Everybody was too bullish for gold, but I think it's just a
minor correction," said Bruce Dunn, vice president of trading
at New Jersey-based Auramet Trading.
Dunn said some selling was related to expirations of COMEX
options and month-end position squaring.
U.S. December gold futures <GCZ9> settled down $15.50, or
1.5 percent, at $998.90 an ounce on the COMEX division of New
York Mercantile Exchange.
The contract hit an intraday low of $991.30, the weakest
price since Sept. 10.
Spot gold <XAU=> was at $995.30 at 3:14 p.m. EDT (1915
GMT), compared with $1,007.05 late in New York on Wednesday.
The dollar index <.DXY> jumped more than 1 percent against
a basket of major currencies. Gold is generally used as a hedge
against the depreciation of dollar-denominated portfolios.
"The dollar bounced back and gold rose," said Michael
Kempinski," a trader at Commerzbank. "It's a healthy
correction. ... Some investors were disappointed that gold
hasn't broken higher, but it did rise too fast."
Traders said falling crude <CLc1> prices were also weighing
on gold, used as a hedge against inflation, which is often
triggered by rising oil prices. U.S. crude futures fell nearly
$3 to under $66 a barrel.
UNDERLYING SUPPORT
Some analysts said gold would draw support from resilient
demand in the physical market in Asia.
"Despite high prices physical demand seems to be recovering
a bit," said Eugen Weinberg, an analyst at Commerzbank.
"Together with higher investment interest, it's providing a
good picture."
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,101.735
tonnes as of Sept 23, unchanged from the previous business
day.
Among other precious metals, silver <XAG=> slipped to
$16.27 from $16.71, platinum declined to $1,299 from $1,318.5
and palladium dipped to $290 from $292, its previous session
close.
Traders said precious metals and other asset markets were
waiting for the conclusions from the G20 summit in Pittsburgh
on Thursday and Friday. []
The timing for plans to unwind emergency economic support
is a key issue for investors as the G20 leaders seek ways to
nurture the recovery from the recession and build safeguards
against future catastrophes. []
(Additional reporting by Pratima Desai in London; Editing
by David Gregorio)
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 998.90 -15.5 -1.5 884.3 13.0
US silver <SIZ9> 16.295 -0.615 -3.6 11.295 44.3
US platinum <PLV9> 1308.50 -19.30 -1.5 941.50 39.0
US palladium <PAZ9> 297.90 0.25 0.1 188.70 57.9
Prices at 2:42 p.m. EDT (1842 GMT)
Gold <XAU=> 995.40 -11.65 -1.2 878.20 13.3
Silver <XAG=> 16.27 -0.44 -2.6 11.30 44.0
Platinum <XPT=> 1298.50 -20.00 -1.5 924.50 40.5
Palladium <XPD=> 291.50 -0.500 -0.2 184.50 58.0
Gold Fix <XAUFIX=> 1009.75 -4.25 -0.4 836.50 20.7
Silver Fix <XAGFIX=> 16.76 -34.00 -2.0 14.76 13.6
Platinum Fix <XPTFIX=> 1325.00 7.00 0.5 1529 -13.3
Palladium Fix<XPDFIX=> 298.00 4.00 1.4 365.0 -18.4
