PRECIOUS-Gold eases as ETF holdings fall again, U.S. cuts eyed

Mon Mar 4, 2013 4:29pm EST

* Largest physical gold ETF logs 9th day of outflows
    * Obama, Republicans far apart on averting U.S. budget cuts
    * Top Fed official says aggressive stimulus necessary
    * Coming up: U.S. ISM service-sector index Tuesday

 (Adds market details, updates prices)
    By Frank Tang
    NEW YORK, March 4 (Reuters) - Gold prices eased on Monday as
demand waned for gold-backed exchange-traded funds and investors
continued to digest the effect of wide-ranging U.S. government
spending cuts on bullion.
    A lack of major U.S. economic indicators and a flat U.S.
equities market failed to provide gold with a new catalyst,
leading to quiet trading. 
    Some investors remained on the sidelines, with President
Barack Obama and congressional Republicans still apart on a deal
to avert automatic U.S. budget cuts. The White House ordered
cuts in government spending on Friday night. 
    Gold, a traditional safe haven in times of economic
uncertainty, is also viewed as an inflation hedge, and a major
reduction in U.S. spending has assuaged most inflation concerns.
    Also weighing on investor sentiment, data showed holdings of
the world's largest gold-backed ETF, the SPDR Gold Trust,
posted a ninth consecutive daily decline on Friday. 
    "February marked the largest monthly outflow across
physically backed gold exchange-traded products. Continued net
redemptions at this pace pose the largest downside risk to
prices, in our view," Suki Cooper, precious metals strategist at
Barclays Capital, said in a note. 
    Spot gold was down 0.1 percent at $1,573.46 per ounce
by 4:04 p.m. EST (2104 GMT).
    U.S. gold futures for April delivery settled up 10
cents per ounce at $1,572.40, with trading volume about 30
percent below its 250-day average, preliminary Reuters data
showed.
    The SPDR Gold Trust notched an outflow of 0.6 tonne on
Friday, extending its losing streak after reporting the biggest
ever one-month drop in February. 
    Gold prices in February fell for a fifth straight month for
the first time since 1997. Buying interest has dried up after
the metal failed to rally back toward record highs last year
despite successive rounds of monetary easing from the Federal
Reserve.
    Gold mining stocks took a hit too as bullion prices tumbled.
The S&P GSCI Gold index, a gold equities benchmark,
also posted a five-month losing streak in February for its
longest consecutive monthly decline since 1996.
    While gold ETFs were lackluster, sales of American Eagle
gold coins and silver rose sharply year-on-year in February,
highlighting fervent buying by individual investors.
    Silver inched down 1 cent at $28.55 an ounce.
    
    STRONG DOLLAR TRUMPS GOLD
    The U.S. dollar's recent strength has hurt gold's safe-haven
 status, Danske Bank analyst Christin Tuxen said.
    The dollar index was little changed on Monday after
it extended its weekly gain to a fourth straight week last
Friday.
    Bullion investors now look forward to the European Central
Bank's meeting on Thursday for trading cues.
    Underpinning gold prices was news Janet Yellen, the Federal
Reserve's influential vice chair, said on Monday aggressive U.S.
monetary stimulus is warranted given how far the economy was
operating below its full potential. 
    Among other precious metals, platinum was down 0.3
percent at $1,564.74 an ounce and palladium dropped 0.7
percent to $714.47 an ounce.
    
 4:04 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold APR   1572.40   0.10   0.0  1568.70 1584.30  113,367
 US Silver MAY  28.496  0.006   0.0   28.430  28.815   26,220
 US Plat APR   1566.20  -7.30  -0.5  1564.00 1585.10    8,716
 US Pall JUN    714.45  -5.95  -0.8   713.00  726.75    4,014
                                                               
 Gold          1573.46  -1.40  -0.1  1569.93 1584.50         
 Silver         28.550 -0.010   0.0   28.450  28.800
 Platinum      1564.74  -5.00  -0.3  1565.50 1582.25
 Palladium      714.47  -5.00  -0.7   715.00  724.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        125,145   200,412   177,241     15.05   -0.19
 US Silver       29,880    64,044    53,085     23.51    0.30
 US Platinum      9,326    13,645    10,841     18.63    0.08
 US Palladium     4,125     9,102     5,251                  
                                                               
   

 (Additional reporting by Jan Harvey and Natalie Huet in London;
Editing by David Gregorio and Dale Hudson)
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