Gold pares gains as jewellers buy

Tuesday, 5 October 2010 22:10 - - {{hitsCtrl.values.hits}}

(Reuters) - Gold pared losses on Tuesday after a price drop ignited buying from jewelers in India and elsewhere in Asia, but a firmer U.S. dollar could cap further gains.

A slight decline in ETF holdings might also weigh on gold, which struck a lifetime high last week. Silver eased after rising to another 30-year high the previous day, but it has gained in popularity as a cheaper alternative to bullion for investment.

Gold hit a low of $1,311.75 an ounce before bouncing to $1,317.50 by 0623 GMT, up $2.30 from New York's notional close on Monday, but off a lifetime high around $1,320 hit last Friday. "I think there's a little bit of physical buying," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. "The jewelry sector has to buy because of the seasonal thing," Leung added, referring to the festive season in main consumer India.

Gold has gained as much as 20 percent this year, partly driven by expectations the Federal Reserve would take fresh steps to aid the economy, but a firmer dollar and renewed concerns about euro-zone debt prompted some investors to sell.

Dealers in Singapore said demand from India persisted, although the quantity was small, while purchases from Thailand helped stir up the physical sector and kept premiums for gold bars steady at 50 to 80 cents to the spot London prices.