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Gold bounces below $950

NEW YORK, 8 June 2009 (Reuters) By Frank Tang

Gold (GOLDC-I941.701.000.11%) futures fell below $950 (U.S.) an ounce Monday as the U.S. dollar rose sharply for a second straight session amid signs of an economic recovery, decreasing the appeal of bullion as a hedge against the weakening U.S. currency.

Platinum group metals tracked gold to drop sharply as a stronger greenback prompted across-the-board selling in dollar-denominated commodities. The Reuters/Jefferies CRB index dropped almost 1 per cent.

“A lot of gold's weakness is dollar related. The market may be overdone ... with the fact that everybody is trying to pick $1,000 last week – it never materialized again,” said Bruce Dunn, vice-president of trading at New Jersey-based Auramet Trading.

The dollar has rallied since Friday after data showed United States lost fewer jobs than expected in May, and recent better economic indicators also dented gold's status as a safe haven.

Investors usually view gold as an insurance against the falling value of their dollar-denominated portfolios. The inverse relationship between gold and the dollar broke down early this year as both assets benefited from a flight to quality.

U.S. gold futures for June delivery on the Comex division of the New York Mercantile Exchange settled down $10.10, or 1.1 per cent, at $952.50 an ounce. Earlier in the session, it hit a two-week low of $943.80.

Spot gold was at $950.75 an ounce at 2:25 p.m. ET, against $955.30 an ounce late in New York on Friday.

“There is not much physical demand from jewellers,” said Matthew Turner, analyst at VM Group. “So with a stronger dollar and a related desire by investors to take the profits they can, there is not much to keep [gold] up.”

Analysts say current prices are high for consumers in major jewellery markets such as India, but that buying could resurface if prices fall to $900 an ounce or lower.

Investors' appetite for gold also appeared to be waning, with the bullion holdings of the largest gold Exchange Traded Fund, New York's SPDR Gold Trust, declining on Friday.

Turkey, one of the world's leading gold consumers, said its imports of the metal fell back to zero in May from 26 kilograms the previous month. Abu Dhabi gold sales remained flat, an industry group said.

Silver was at $14.91 an ounce against $15.23, tracking moves in gold. Platinum at $1,235.50 an ounce against $1,262 late in New York on Friday and palladium was at $248 against $253.

The platinum group metals, primarily used in automotive catalysts, followed gold's lead. Platinum and palladium are also under pressure from the carnage in car manufacturing sector.

“We've seen a bit of a strengthening in the dollar and some of the consumption side numbers from the auto industry haven't been that positive,” said Société Générale analyst David Wilson.

On the other hand, investors' interest in platinum showed signs of resiliency.

ETF Securities' platinum and palladium backed ETCs both grew last week, while Zurich Cantonal Bank's Platinum ETF added 6,359 ounces or 3.7 per cent to its holdings.

Many commodities analysts said that the price of platinum represented a bargain compared to gold. Platinum is currently trading at half of its all-time high $2,290 an ounce reached in March last year.

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