(Releads, updates prices)
* Anglogold expects gold to hit $2,200 by 2012
* Low interest rates support gold purchases
* Fed's Tuesday/Wednesday meeting a focus
By Pratima Desai
LONDON, Sept 19 Gold fell on Monday as the
dollar rallied, but European policy makers' failure to soothe
fears of Greek default and contagion to other euro zone
countries will support prices as investors to seek refuge in the
Spot gold was bid at $1,793.90 a troy ounce at 1405
GMT from $1,810.73 late in New York on Friday. The precious
metal hit a record high of $1,920.30 on September 6.
A stronger U.S. currency makes dollar-denominated metals
more expensive for holders of other currencies. Gold has so far
on Monday ranged between $1,827.36 and $1,788.99 an ounce.
The cancellation of a visit by Greek Prime Minister George
Papandreou to the United States to chair an emergency cabinet
meeting at home and a regional election defeat for German
Chancellor Angela Merkel added to perceptions of a worsening
"Given ongoing problems in the euro zone and the financial
system, safe-haven demand should remain strong," said Carsten
Fritsch, analyst at Commerzbank.
EU finance ministers at meetings ending on Saturday broke no
new ground in dealing with the crisis and made no decision on
whether to give more firepower to the 440-billion euro bailout
fund as suggested by U.S. Treasury Secretary Timothy Geithner.
Markets are expected to focus on a policy meeting of the
U.S. Federal Reserve on Tuesday and Wednesday. Any announcement
of further stimulus for the economy could help buoy gold prices.
"Despite the FOMC meeting taking centre stage this week,
Europe is still likely to hold the market's attention as IMF/EU
inspectors will be in Greece," UBS said in a note.
Also a focus for the gold market is the London Bullion Market
Association's conference in Montreal, Canada.
Gold prices are expected to hit $2,200 by 2012, supported by
the economic uncertainties in Europe and the United States, said
the chief executive of AngloGold Ashanti , the world's
third-largest gold producer.
"The European sovereign debt crisis remains unresolved,
underpinning investment demand, and we see an extended period of
negative real interest rates," Morgan Stanley said in a note.
Low or negative interest rates mean there is no opportunity
cost to holding gold as major currencies such as the dollar, yen
or sterling yield little or nothing in interest.
The Federal Reserve, facing rising global financial strains
and recession fears, is poised to increase downward pressure on
longer-term interest rates next week in a bid to help the
sputtering U.S. recovery.
"Beyond near-term weakness, we remain positive on gold as
uncertainty heightens over Europe and the near-term outlook for
the U.S., as well financial market instability," Barclays
Capital said in a note.
"(Gold's) downside has been cushioned by physical demand and
looks to be increasingly supported amid the seasonally strong
period for demand."
Analysts expect gold to be supported at $1,800 an ounce, a
level at which Asian buyers have been seen returning to buy.
On the upside, gold is likely to zigzag up towards $1,930 an
ounce, with an immediate target at $1,860, said Reuters market
analyst Wang Tao.
Silver tracked gold lower. It was at $39.40 an ounce
from $40.60 late on Friday.
Platinum was at $1,791.74 from $1,804.83 and
palladium at $716.00 from $727.05 an ounce.
Platinum and palladium have recently come under pressure
from expectations of weaker demand from the auto industry, which
uses precious industrial metals to make catalytic converters for
(Editing by William Hardy and Jason Neely)