* Dollar index hits five-week high to pressure gold
* Gold bar premiums steady in Hong Kong
* SPDR holdings at lowest since February 2009
(Updates prices, adds comment, rewrites throughout, adds
By Carole Vaporean and Clara Denina
NEW YORK/LONDON, July 2 Gold was lower on
Tuesday as the dollar strengthened and investors looked for
further indications that the Federal Reserve may soon end its
U.S. stimulus program.
One indication may be on Friday with a U.S. employment
The precious metal was higher early on Tuesday on short
covering after its biggest quarterly loss since at least 1968.
But those gains were brief as some money managers used the
opportunity to sell out of long positions.
"The dollar index is strengthening quite a bit, equities are
strengthening and you're seeing interest rates go up. That seems
to be the perfect storm against the metal at the moment," said
Phillip Streible, senior commodities broker at R.J. O'Brien in
Chicago, adding that gold's failure to push through resistance
near $1,260 per ounce caused other players to sell.
Spot gold and was off 0.58 percent at $1,245.16 by
1244 EDT (1644 GMT), after rising earlier to a near one-week
high at $1,267.20 an ounce. U.S. gold futures for August
delivery fell 0.92 percent to $1,244.10 an ounce.
Investors, wary of taking fresh positions before the U.S.
Independence Day holiday on Thursday, are focused on Friday's
U.S. monthly employment report. A strong reading would lift both
U.S. Treasury yields and the dollar, and in turn weigh on gold.
"There was some short-covering earlier in the day, but
generally investors are a bit cautious to take positions due to
a strong dollar ahead of the U.S. (jobs) data on Friday. And if
numbers are better than expected, selling momentum could kick in
again," MKS Capital senior vice president Bernard Sin said.
Gold lost 23 percent in the April-June period after Fed
Chairman Ben Bernanke suggested that the Federal Reserve would
begin tightening its ultra-loose monetary policy when U.S.
economic growth picked up. That would mean rising U.S. interest
rates, making gold less attractive.
Some analysts warned that gold's recovery from last week's
three-year low at $1,180.70 was not likely to last for long,
with some participants anticipating eventual prices declines to
$1,000 an ounce.
The dollar rose to a five-week peak against a basket
of currencies on a broad view that the Federal Reserve will
scale back its stimulus measures sooner than expected given the
recent run of generally solid U.S. economic data.
Data so far this week show a rebound in U.S. manufacturing
and a rise in factory orders, suggesting the sector was
Friday's U.S. non-farm payrolls report will be watched
closely, with investors expecting 165,000 new jobs in June and a
lower unemployment rate of 7.5 percent.
ETF HOLDINGS HIT 4-1/2 YEAR LOWS
SPDR Gold Trust, the world's largest gold
exchange-traded fund, reported an outflow of 1.2 tonnes to
968.30 tonnes on Monday, its lowest since February 2009. Its
holdings have dropped 382.5 tonnes since the start of the year.
Physical demand has not rescued gold as it did in April,
when prices fell the most in 30 years. But Shanghai futures
were trading at more than a $30 premium to spot prices,
indicating some renewed interest.
"There has been some good physical demand with premiums in
Asia remaining elevated ... (showing) that buyers believe that
gold has probably done enough on the downside for now," Marex
In Hong Kong and Singapore, however, gold bar premiums
remained at the same levels as last week, indicating demand had
not picked up strongly.
Silver lost 0.97 percent to $19.37 an ounce. It reached a
near three-year low at $18.19 on Friday.
Platinum was down 0.66 percent at $1,365.49 an ounce
and palladium dropped 32 percent to $686.72 an ounce.
(Editing by William Hardy and Bob Burgdorfer)