* Gold up 10.7 pct in Feb, biggest rise since Jan 2012
* Holdings of SPDR gold ETF hit highest since Sept 2014
* Palladium rallies to 2-week high amid strong U.S. car
* GRAPHIC-2016 asset returns: reut.rs/1WAiOSC
(Rewrites throughout, updates prices; adds comment, second
byline, NEW YORK dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, March 1 Gold turned lower on
Tuesday, as the dollar and global equity markets rose on
better-than-expected U.S. data, fueling speculation the Fed will
raise U.S. interest rates.
Palladium surged more than 6 percent on strong U.S. auto
Spot gold was down 0.2 percent at $1,235.96 an ounce
at 3:12 p.m. EST (2012 GMT), after its biggest monthly gain in
four years on safe-haven buying spurred by global economic
U.S. gold futures for April delivery settled down 0.3
percent at $1,230.80.
Gold prices were higher earlier, buoyed by weak Chinese
manufacturing data and comments by New York Federal Reserve
President William Dudley, who said he sees downside risks to his
U.S. economic outlook. This could flag a longer pause before the
Fed's next interest-rate hike than he and his colleagues had
"Some U.S. dollar strength (is putting) a headwind into the
gold market here, even though you've got a lot of speculation
now moving to be long gold and (monthly) exchange-traded product
flows rising to the second-highest level since February 2009,"
said Rob Haworth, senior investment strategist for U.S. Bank
Wealth Management in Minneapolis.
The dollar rallied against a basket of major
currencies after U.S. manufacturing appeared to stabilize in
February, supporting views of higher U.S. interest rates, a
source of pressure for gold prices.
U.S. stocks led equity markets around the globe to their
highest in a month.
Meanwhile, European Central Bank President Mario Draghi said
Euro zone growth and inflation prospects have weakened.
Further inflows into gold-backed exchange-traded funds
indicated buoyant investor appetite for gold with the largest,
New York-listed SPDR Gold Shares, seeing inflows of nearly
15 tonnes on Monday, taking holdings to their highest since
"From our perspective, it's warranted to reconsider gold's
role as insurance in a portfolio," Julius Baer analyst Carsten
Although global economic concerns have prompted investors to
channel money into gold, rising prices have muted some physical
demand in the major Asian gold-consuming regions.
India, the second-largest consumer, has reintroduced a local
sales tax on gold jewelry and jewelers there will go on
indefinite strike from Tuesday in protest.
Palladium rallied after underperforming other precious
metals last month, with traders noting support from strong U.S.
auto sales, which soared to a 15-year high in February.
Spot palladium rose by as much as 6.7 percent to $523
an ounce. Silver was down 0.1 percent at $14.86 an ounce
while platinum was up 0.6 percent at $935.74 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore and
Manolo Serapio Jr in Manila; Editing by David Evans and Lisa