Gold off highs as sellers unwind risk play

NEW YORK/LONDON Wed Sep 8, 2010 5:52pm EDT

A saleswoman stands behind the showcased gold necklaces at a jewellery showroom in Agartala, capital of India's northeastern state of Tripura, August 18, 2010. REUTERS/Jayanta Dey

A saleswoman stands behind the showcased gold necklaces at a jewellery showroom in Agartala, capital of India's northeastern state of Tripura, August 18, 2010.

Credit: Reuters/Jayanta Dey

NEW YORK/LONDON (Reuters) - Gold was little changed late on Wednesday after some investors unwound risk-aversion plays that had sent prices near record highs early, opting instead for rallying assets such as oil and industrial metals.

Spot gold was bid at $1,256.05 an ounce by 3:28 p.m. EDT (1928 GMT) against $1,253.10 late in New York on Tuesday. It hit a session high of $1,262.25, near the record peak of $1,264.90 set on June 21.

U.S. gold futures for December delivery slipped $1.80 to end at $1,257.50 an ounce, after reaching their highest since June 28 at $1,264.70.

The all-time high on the December futures chart is $1,270.60 per ounce, but COMEX spot futures' record lies at $1,264.80, hit on June 21.

Silver reached a session high of $20.14 an ounce, a fresh 2-1/2-year peak, but was bid at $19.94 in late New York trade against $19.83 on Tuesday.

Silver had been bid up with other industrial metals, including the platinum group.

Though short-term investors sold gold in afternoon trade, sentiment toward the yellow metal remains mixed. It has risen about 15 percent in 2010, marking 10 years of continuous gains, and looks set for its third all-time high this year.

When gold failed to reach new peaks on Wednesday, some short-term traders took profits on the run-up that had begun in the previous session as concerns about some European banks returned.

By midday some players were selling gold in favor of assets such as oil, industrial metals and U.S. equities, which resumed their rally of late last week that followed a U.S. employment report showing unexpected bright spots.

Some investors remained sidelined, waiting for the Federal Reserve's so-called Beige Book, which ultimately had little impact on after-hours business.

The Fed said it observed "widespread signs" that economic growth had eased in the six weeks through August, in a report suggesting the U.S. recovery was faltering along the East Coast and the Midwest. [nWAL8KE6JM]

The Beige Book, which gives an anecdotal overview of economic progress from every region in the United States, said modest growth continued in the five western districts. At the same time, it reported growth was mixed or had slowed in New York, Philadelphia, Richmond, Atlanta and Chicago.

"Looking at some of the headlines, it's not all that encouraging. But then, it looks like more of the same. We've already heard most of it from (Fed Chairman Ben) Bernanke on several occasions," said Tom Pawlicki, precious metals analyst at MF GLOBAL in Chicago.

STALLING

Gold has hit tough resistance just below its record high, but analysts say they are confident in the metal's rise.

UBS strategist Edel Tully said she had upgraded her gold price forecasts based on its traditional outperformance in September, coupled with safe-haven demand emanating from a focus on sovereign fiscal burdens.

"Given the range of factors conspiring to push gold higher in September, we raise our one-month forecast to $1,300, from $1,230 previously. We also lift our three-month target to $1,300, from $1,200 previously," she wrote in a report.

Also supporting prices was news that China, the world's biggest gold miner, had a fall in output in July. The country is a major consumer of gold, and speculation its output may fail to satisfy domestic demand is likely to underpin prices.

Elsewhere, platinum pulled off highs to $1,557.00 an ounce against $1,553.03, and palladium was at $525.00 against $520.85.

(Additional reporting by Jan Harvey; Editing by Dale Hudson