Gold ends off, hit by firm dollar as ECB sale awaited

NEW YORK Fri Sep 10, 2010 4:47pm 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 (Reuters) - Gold prices steadied at moderately lower levels below $1,250 an ounce on Friday as the yen slid against the dollar and investors continued to unwind safe-haven plays made this week, but analysts said the IMF's late Thursday gold sale lent support.

Spot gold at $1,245.85 an ounce was down by 3:38 p.m. EDT (1938 GMT) from Thursday's closing bid at $1,248.27 an ounce. It fell to $1,236.55 an ounce, its lowest in a week.

U.S. December gold futures eased $4.40 to end at $1,246.50 an ounce on the COMEX division of the NYMEX. The range extended down to $1,237.90, its lowest in 10 days.

Earlier this week, bullion touched its highest in two months, above $1,262 an ounce, on renewed worries about the European banking sector. But by Friday, some investors were unwinding that safety play, not wanting to carry those positions over the weekend.

The yen's slide against the dollar also hurt gold. Both the euro and dollar rallied against the yen, as strong import data from China raised optimism about global economic growth and prompted higher risk tolerance.

China's imports leaped in August, boding well for a strengthening of domestic demand in an economy that has become a major driver of global growth.

Some gold players put on stop-loss sell orders at lower levels over concerns about when the European Central Bank will sell its annual 500 tonnes of gold, which happens every September.

"Last year, not all of the participating banks used up what they were allocated to sell. That's the reason for some trepidation. They might sell it this year, because we're near (record) highs. And the (ECB) sale could come at any time," said George Gero, vice president at RBC Capital Markets Global Futures in New York.

A gold sale late Thursday by the International Monetary Fund gave the precious metal an underpinning. Many analysts said they saw the IMF sale as an indication that central banks still want to own gold.

The IMF said late on Thursday that it sold 10 tonnes of gold to the central bank of Bangladesh this week, its first sale after a 10-month hiatus, as a volatile U.S. currency draws holders to bullion.

In the near term, some traders see gold in a range at lower levels between $1,225 and $1,245 an ounce.

"There hasn't been enough genuine demand around," said Simon Weeks, head of precious metals at the Bank of Nova Scotia. "The ETFs are struggling to gain any decent investment, and the physical market's gone quiet."

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said its holdings slipped to 1,293.531 tonnes by September 9 from 1,294.442 tonnes by September 3. The holdings hit a record 1,320.436 tonnes on June 29.

Gold jewelry sales in Italy, the European Union's top market by consumption, fell 23.5 percent in the second quarter and are likely to fall 18 percent for the full year, a World Gold Council official said on Friday.

UPWARD TREND IN PLACE

Interest by Asian central banks in bullion is a factor that could support prices in the long term, analysts said. Industry experts expect more central banks to follow the move by Bangladesh.

"Gold is one of the few asset classes that is almost universally permissible by the investment guidelines of emerging countries' central banks," said Natalie Dempster, director, government affairs, at the World Gold Council.

Spot silver was nearly even at $19.80 an ounce from $19.79 late in New York on Thursday. It touched $20.14 an ounce earlier this week, its highest since March 2008.

Palladium was lower at $517.50 an ounce than $518.73 an ounce previously, while platinum declined to $1,540 an ounce from Thursday's $1,548.28 an ounce.

(Additional reporting by Lewa Pardomuan in Singapore and Humeyra Pamuk in London; Editing by Walter Bagley)

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