Gold ends tad lower as market takes breather

NEW YORK (Reuters) - Gold finished slightly lower in New York on Tuesday, giving back all of its initial gains after rising toward a record high, as the bullion market took a breather on signs that the credit market meltdown could take a toll on global growth.

Patrick Fearon, precious metals analyst with A.G. Edwards & Sons in St. Louis, said that a sharp bounce in the dollar from its early lows and falling energy prices triggered profit taking.

"And I think ultimately you also have to keep in mind that with the global economy slowing down, at some point, that's going to be negative for gold. So we should expect to see a pullback at some point," Fearon said.

Spot gold XAU= rose as high as $913.70 an ounce after falling to a low of $894.10. It was quoted at $899.50/900.20 by New York's last quote at 2:15 p.m. EST, against $902.10/902.80 in New York late on Monday when it hit an all-time high of $914.

The most-active U.S. gold contract for February delivery at the COMEX division of the New York Mercantile Exchange GCG8 settled down 80 cents at $902.60 an ounce. Earlier, it bottomed at $891.90 before setting a record high of $916.10 for COMEX futures on a continual spot-month basis.

The New York February contract has now hit record highs during each of the last six sessions.

The dollar fell to its lowest against the yen since June 2005 and was initially lower versus the euro after U.S. retail sales data provided further evidence an economic slowdown was spreading to the consumer.

However, heavy selling of the U.S. currency against the yen pushed the euro down by midafternoon.

Gold is often viewed as an alternative to holding the dollar, and thus the value of gold usually rises when the U.S. dollar falls.

Jon Nadler, senior analyst with Kitco Bullion Dealers in Montreal, told clients in a note that the gold market showed signs of mild profit taking after a technical analysis indicator signaled that bullion could be overbought.

"While this is not nearly as sharp of a pullback as could be expected, and another run to the upside is still possible, but the market is now seriously evaluating the magnitude of the remaining upside potential...," Nadler said.

In early trade, a combination of strong speculative interest and flight-to-quality buying amid uncertainties in the financial market sent gold rising near its record high in spite of sharply lower energy prices.

"I think gold is breaking waves on its own because of the increase in speculative activities, technical trading, investment demand and a declining dollar," said Carlos Sanchez, associate director, research, with the CPM Group in New York.

Falling crude oil prices also dented the metal's appeal as a hedge against inflation. U.S. crude futures CLc1 dropped $2.30 to close at $91.90 a barrel.

RECORD HIGH ETF

Investors continued to park their money in exchange-traded funds, backed by physical metals.

Gold held in New York-listed StreetTRACKS Gold Shares (GLD.P) XAUEXT-NYS-TT, the world's largest gold-backed ETF, rose to a record high of 652.56 tons on Monday.

London-based ETF Securities said in a statement its precious metal ETFs had accumulated over $1.1 billion since April 2007. In the past six weeks, they added $260 million, shared equally amongst platinum, silver, gold and a precious metals basket.

In the physical sector, consumers in India turned their backs on jewelry shops as gold hit record highs, but others showed more resilience with dealers noting demand out of China and other parts of Asia. India is the world's largest consumer of gold.

Platinum XPT= rose to $1,568.50/1,5783.50 from $1,572/1,577 an ounce late in New York on Monday, when it spiked to a record high of $1,590.50, tracking gold's rally.

"The outlook for the white metal is still extremely bullish, with the tight fundamental picture limiting price dips and the white metal should now look to challenge $1600/oz," James Moore, precious metals analyst at TheBullionDesk.com said in a note.

Silver XAG= rose to $16.10/16.15 from its previous close at $16.31/16.36 an ounce, but off Monday's 27-year high of $16.58. Palladium XPD= was $1 down at $378/384 an ounce.

(Additional reporting by Atul Prakash in London, Lewa Pardomuan in Singapore and Biman Mukherji in New Delhi; Editing by Christian Wiessner)