* Gold's uptrend to hold, but short-term correction likely
* Moody's downgraded SocGen, Credit Agricole; extends review
* Spot gold could rise to $1,885.39 -technicals
* Coming Up: Greece, France and Germany conference call;
(Writes through; adds comment, detail)
By Rujun Shen
SINGAPORE, Sept 14 Spot gold reversed early
gains and lost half a percent on Wednesday following sagging
equities, after rating agency Moody's downgraded two of France's
top banks and fuelled fears of a full-blown banking crisis in
the euro zone.
Moody's downgraded Societe Generale and Credit
Agricole , and said it was extending its review of BNP
The news did not surprise many in the market, as talk of
problems with French banks have circulated for weeks.
"Part of it has already been priced in, but it certainly
added to the gloom," said a Singapore-based trader.
Stocks fell in Asia, where some regional indexes hit lows
unseen since 2009, forcing some investors to sell their
profitable gold positions to cover losses elsewhere.
"Stocks look really ugly now. In addition there is a
rallying dollar, capping gold's upside," said the trader.
Spot gold reversed early gains and lost half a
percent to $1,824.09 an ounce by 0651 GMT, after rising 1.1
percent in the previous session.
U.S. gold GCcv1 edged down 0.1 percent to $1,828.20.
The dollar rose 0.7 percent against a basket of currencies
, as the euro dropped ahead of a conference call among
leaders of Greece, France and Germany. The greenback is headed
for its 10th day of gains since Aug. 30.
Gold bugs need to be aware of possible short-term technical
weakness, even though the euro zone's debt crisis and an
uncertain global economic outlook may keep gold prices buoyant
in the long run.
"Technically we are running into a challenging situation
over the next 2-3 days, as the uptrend from the beginning of
July faces a short-term correction," said Dominic Schnider, head
of commodity research of UBS Wealth Management in Singapore.
"People are realising the euro concept, not just the debt
problem, has major flaws and if they are not changing
dramatically in the set-up, we are going to end up in a huge
crisis. This degradation is happening right now and warranting
higher gold prices."
Adding to uncertainties in global growth, China's Premier
Wen Jiabao vowed to keep monetary policy tight to battle
inflation, dashing hopes that Beijing would loosen up policy any
time soon even as the global economy slows.
Technical analysis suggested that U.S. gold could move
sideways in the next few weeks, while commodities as a whole may
correct moderately by the end of the year, said Reuters market
analyst Wang Tao.
Asia's physical buyers have largely stood on the sidelines
of the gold market, save for occasional entries when prices
dipped near $1,800, dealers said.
Holdings of the world's largest gold-backed exchange-traded
fund, SPDR Gold Trust , edged lower to 1,241.311 tonnes by
Sept. 13 from a 2-1/2-week high of 1,241.917 tonnes on September
Precious metals prices 0651 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1824.09 -9.21 -0.50 28.51
Spot Silver 40.79 -0.24 -0.58 32.18
Spot Platinum 1803.49 -6.78 -0.37 2.04
Spot Palladium 717.47 -4.03 -0.56 -10.26
TOCOM Gold 4525.00 -2.00 -0.04 21.35 77715
TOCOM Platinum 4503.00 -43.00 -0.95 -4.11 10558
TOCOM Silver 100.60 0.40 +0.40 24.20 417
TOCOM Palladium 1806.00 14.00 +0.78 -13.88 352
COMEX GOLD DEC1 1828.20 -1.90 -0.10 28.62 28550
COMEX SILVER DEC1 40.91 -0.29 -0.70 32.21 2722
TOCOM prices in yen per gram. Spot prices in $ per ounce.
COMEX gold and silver contracts show the most active months
(Editing by Clarence Fernandez)