Gold near one-week high on oil, ETF holdings up

Enlarge Photo A shopkeeper displays a tray of gold earrings for a customer at a jewellery shop...

Wed, May 7 08:38 AM

By Lewa Pardomuan

SINGAPORE (Reuters) - Gold edged down on Wednesday but was still near a one-week high hit the previous day after crude oil powered to another record and spurred buying of the precious metal by investors seeking to hedge against inflation.

An increase in gold holdings in the world's largest exchange-traded fund (ETF) for bullion, StreetTRACKS Gold Shares, suggested investors were putting their money

back into gold after a drop to a four-month low last week.

Gold hit an intraday high of $881.05 an ounce, not far from Tuesday's one-week high of $882.70, before slipping to $876.65/877.65 an ounce, down slightly from $877.40/878.60 late in New York.

"Fund money gradually enters the market. The ETF turnover has increased a little bit," said Yukuji Sonoda, a precious metals analyst at Daiichi Commodities in Tokyo.

"This is a good sign. I do hope this is a turning-point."

Gold held in StreetTRACKS Gold Shares rose to 584.44 tonnes from 580.45 tonnes last week but that was still down from a record of 663.83 tonnes in mid-March.

The gold price struck a record $1,030.80 an ounce on March 17 but attempts to recapture that level have been met by profit taking. It tumbled to its lowest in four months at $845 an ounce last week after a rebound in the dollar.

Crude oil steadied ahead of U.S. inventory data after hitting a record above $122 a barrel on Tuesday due to a weakeningdollar, supply concerns and a forecast of oil reaching $200 abarrel within two years.

"Gold is getting a bit of support from oil at the moment but I think gold is still a bit weak compared with other commodities," said a dealer in Singapore.

"I think the topside will be in the region of $890 to $900 for spot gold. On the downside, a move back below $870 may bring us back to the $845 level. Also, we've got to watch how oil moves today."

Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange added $1.9 an ounce to $879.6 an ounce.

The most active Tokyo platinum contract jumped by the daily 300 yen limit as speculators built up positions after a long holiday weekend.The benchmark contract for April 2009 delivery on the Tokyo Commodity Exchange rose to 6,335 yen per

gram.

Spot platinum fell to $1,937/1,957 an ounce from $1,947.50/1,967.50 late in New York.

Silver edged down to $16.83/16.89 an ounce from $16.84/16.91 an ounce. Spot palladium fell to $425.50/433.50 an ounce from $427.50/435.50 an ounce.

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