* U.S. equities gain weighs on gold's safe-haven status
* Deep U.S. spending cuts raise deflation worries
* Coming up: U.S. GDP data, PCE Price Index Thursday
(Updates throughout, changes byline, dateline, pvs LONDON)
By Frank Tang
NEW YORK, Feb 27 Gold fell 1 percent on
Wednesday, nearly erasing all of the previous session's gains,
hit by disappointment over a lack of new Federal Reserve
stimulus and deflation worries over across-the-board deep U.S.
A rally in U.S. equities also weighed on gold's safe-haven
appeal, as bullion snapped a four-session winning streak a day
after Fed Chairman Ben Bernanke defended the central bank's
bond-buying stimulus policy.
On Wednesday, Bernanke said the U.S. jobless rate is
unlikely to reach more normal levels for several years, but
there were few surprises in his second day of testimony to the
Frank McGhee, head precious metals trader of Integrated
Brokerage Services LLC, said that the central bank's policy of
bond buying known as quantative easing "is becoming less and
less effective as Bernanke announced nothing new."
That brings the deflationary aspect of budget cuts known as
sequestration back to the forefront, McGee said.
It is unlikely that Congress will act to stop the $85
billion in across-the-board cuts due to start Friday. The cuts,
mandated by a 2011 deficit reduction law, dent gold's
Spot gold was down 1.1 percent to $1,595.71 an ounce
by 2:08 p.m. EST (1908 GMT), off a 1-1/2-week high of $1,619.66
set on Tuesday.
U.S. gold futures for April delivery were down $19.80
to $1,595.70, with trading volume in line with their 250-day
average, preliminary Reuters data showed.
On Tuesday, Bernanke said inflation remained subdued and the
potential risks of loose monetary policy did not seem material
now. His remarks had eased fears the Fed would end its massive
bond-buying earlier than thought.
Three rounds of quantative easing have helped gold to a
record-breaking rally in the past few years, but signs of U.S.
economic recovery have weighed heavily on the metal this year.
INVESTMENT BUYING UNDER PRESSURE
As a gauge of investor interest, holdings of the SPDR Gold
Trust, the world's top gold-backed exchange-traded fund,
fell around 2.5 tonnes from the previous session to 1,270.44
tonnes on Feb. 26, in its sixth session of decline.
The sell-off in exchange-traded funds (ETFs) since the start
of the year is mostly due to a perceived improvement in the
global economic outlook and concerns on the longevity of the
Fed's quantitative easing, analysts said.
Among other precious metals, silver was down 1.4
percent to $28.94. Spot platinum dropped 1.5 percent to
$1,593.50, while palladium was down 0.4 percent to
2:08 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold APR 1595.70 -19.80 -1.2 1592.60 1614.40 150,628
US Silver MAR 28.943 -0.317 -1.1 28.835 29.390 23,913
US Plat APR 1600.10 -16.40 -1.0 1592.00 1625.80 10,586
US Pall MAR 743.15 3.75 0.5 734.80 749.45 2,577
Gold 1595.71 -17.40 -1.1 1594.25 1614.51
Silver 28.940 -0.420 -1.4 28.900 29.410
Platinum 1593.50 -24.99 -1.5 1595.00 1623.00
Palladium 740.47 -3.25 -0.4 737.50 747.97
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 171,570 197,514 176,590 14.83 -0.68
US Silver 76,484 59,999 52,958 23.24 -1.16
US Platinum 11,281 13,797 10,885 18.55 -0.90
US Palladium 7,892 8,266 5,165
(Additional reporting By Clare Denina in London; Editing by