Gold steadies but investors wary as dollar firms

London (Nov 12)  Gold held steady on Wednesday but overall sentiment stayed with the bears as outflows from bullion funds showed no sign of slowing, while the dollar approached four-year highs.

Market participants were also digesting news that Swiss regulator FINMA said it found a "clear attempt" to manipulate precious metals benchmarks during its investigation into precious metals and FX trading at UBS.

Holdings in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, fell 0.12 percent to 724.46 tonnes on Tuesday - a fresh six-year low.

The figures marked the fund's sixth straight day of outflows. The ETF is seen as a good reflection of market sentiment due to the size of its holdings.

"The overall backdrop is still negative with the dollar tilting towards strength and continued ETF outflows due to continued rises in U.S. stock markets," Commerzbank analyst Carsten Fritsch said.

He added that subdued physical demand in Asia and a weak technical picture were also darkening the outlook.

Spot gold was flat at $1,165.20 an ounce by 1120 GMT, after gaining 1.2 percent on Tuesday.

The metal has been unable to make a convincing break from a 4-1/2 year low of $1,131.85 reached last weak and there is strong resistance around $1,180 - the key technical level below which gold has been sold-off since Oct. 31.

Bullion is seen as an alternative investment to riskier assets during economic uncertainty. But optimism over U.S. economic recovery has boosted stocks and the dollar. The U.S. currency is also getting a leg-up from yen weakness.

The Federal Reserve is expected to raise interest rates sooner rather than later due to the recovery, a move that will heap further pressure on gold, a non-interest-bearing asset.

Gold producers are feeling the pinch of lower prices. South Africa's AngloGold Ashanti said it plans staff cuts through voluntary severances.

In other precious metals, silver fell 0.3 percent to $15.63 , while platinum was flat and palladium rose 1.1 percent to 776.75.

Source:  Reuters