| GEO Business|
Gold gives up early gains
| Updated at: 1350 PST, Tuesday, September 07, 2010|
SINGAPORE: Gold dropped on Tuesday as early buying subsided and the euro slipped against the U.S. dollar, but volatile stock markets could encourage some investors to shift to bullion.
Gold could challenge its lifetime high of around $1,264 an ounce touched in June as the outlook for the global economy remained murky and demand from jewellers steady during the festive season in main consumer India, said dealers.
Spot gold eased $1.00 to $1,248.55 an ounce by 0321 GMT, having hit an intraday high of $1,251 on light physical buying. U.S. gold futures for December delivery were hardly changed at $1,250.6 an ounce.
"Even though there's some liquidation in the ETF, everybody is still bullish. There's so much uncertainty in the economy," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"The festive season is on and we expect to see buying at the lower end. I think the next target is the all time high."
Demand in India rises during the festive season, which begins with Raksha Bandhan in August and lasts through November with Dhanteras -- the single-biggest gold buying day.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings slipped to 1,294.442 tonnes by Sept 3 from 1,294.908 tonnes on Sept 2. The holdings surged to a record 1,320.436 tonnes on June 29.
The Nikkei fell 0.3 percent on Tuesday, hit by profit-taking after four straight days of large gains, and investors are keen to see how Wall Street reacts to U.S. President Barack Obama's infrastructure plan proposal.
Scrambling to spur job creation, Obama proposed a six-year plan to rebuild U.S. infrastructure with an initial $50 billion investment and prepared new business tax cuts.
"There's nothing much going on I must say, but we do see light physical buying," said a dealer in Singapore. "We are still bullish on gold and I guess it will touch new highs soon."
The euro slid from a three-week peak against the dollar hit the previous day, as rekindled worries about the European banking sector prompted investors to cut risks.
Fears that the euro debt crisis would spread helped send gold to a record high in June.
In Shanghai gold futures, the most active December contract barely moved at 272.87 yuan a gram.