RTRS: Gold falls as dollar rises; ETF holdings dip
Gold slipped about 2 percent on Tuesday as the dollar strengthened after a U.S. plan helped boost economic sentiment, but analysts said inflationary concerns would underpin bullion's safe-haven appeal.
Gold was at $920.4/922.4 an ounce at 10:37 a.m. EDT, down from $937.15 late in New York on Monday, when it fell more than 1 percent as investors moved away from safe-haven investments.
The dollar rose against both the yen and the euro as investors concluded a U.S. plan to remove bad loans from banks' balance sheets would do a lot to help the U.S. economy recover sooner than others.
Gold is often viewed as an alternative to holding the dollar, and often falls when the dollar rises because it makes metals priced in the U.S. currency more expensive for holders of other currencies.
"The packages that are currently being implemented in the United States have leant the dollar some strength," said BNP Paribas analyst Michael Widmer. "And at the same time (investors) become a bit less bullish on gold."
European and U.S. stocks traded lower, though world stocks hit five-week highs earlier on Tuesday as investors pocketed riskier assets on growing optimism about the U.S. plan. .N
The U.S. plan earlier helped spur Japan's Nikkei average .N225 to a 2-1/2 month closing high on Tuesday. .T
"Sentiment (on gold) is a bit weaker off a perceived improvement in other forms of asset classes," said Michael Khosrowpour, an analyst at Triland Metals, pointing to overnight gains in stock markets and gains in the dollar.
TESTIMONIES
U.S. Treasury Secretary Timothy Geithner on Tuesday joined the Federal Reserve in calling for authority to wind down failing non-bank financial firms that threaten the financial system.
Analysts said fears of inflation fanned by the Federal Reserve's plans to buy long-dated U.S. Treasuries still lingered even if they had eased a little.
"Gold will probably continue to follow inflation expectations in the near term although it remains vulnerable to improved risk asset sentiment," UBS said in a note.
Bullion has recovered ground from a six-week low of $882.90 marked on March 18 but still has some way to go before approaching the 11-month high above $1,000 reached in February.
It soared to an all-time peak of $1,030.80 in March 2008.
Receding interest in gold was also evident in the holdings of gold-backed exchange traded funds.
