U.S. gold turns lower early on profit taking

NEW YORK, Oct 16 (Reuters) - Gold futures fell in
back-and-forth trade early Tuesday as initial support from
rising crude prices and follow-through buying in the Asian
markets diminished as bullion investors locked in recent
profits.

"We seem to be under a little pressure again. But the
market's stable, with some fund buying again, and just some
profit-taking keeping the market from climbing," said Carlos
Perez-Santalla, a floor trader for Hudson River Futures in New
York.

At 10:32 a.m. EDT (1432 GMT), most-active December gold
GCZ7 on the COMEX division of the New York Mercantile
Exchange was down $1.40 at $760.80 an ounce.

In early electronic trade, December gold rose as high as
$772 an ounce, boosted by a spike in crude prices and robust
buying by Japanese investors triggered by a higher yen versus
the dollar, Perez-Santalla said.

The December contract hit a session low of $759.30.

Earlier on Tuesday, U.S. crude CLc1 surged more than $2
to a record $87.97 a barrel on tight supplies, strong demand
and tension in northern Iraq because of a possible Turkish
military operation against Kurdish rebels there.

Oil later retreated but held above $86 a barrel by
midmorning.

"As long as oil trades above $85 a barrel without damaging
the global growth (at higher prices), gold would continue to
gain on inflationary fears," Pradeep Unni, assistant vice
president of Vision Commodities in Dubai, said in a client
note.

However, Unni said, if the Federal Reserve postponed
further rates cuts, gold would suffer because of a rising
dollar.

The dollar fell against the yen and pared earlier gains
against the euro on Tuesday after a report showed a sharp
outflow of funds from the United States in August.

Selling in the U.S. currency against the yen started in
Asian trading and picked up after the U.S. Treasury said the
country registered a record net $163 billion outflow in
August.

On central-bank gold sales, gold and gold receivables held
by euro zone central banks fell by 108 million euros to 185.975
billion euros in the week ending Oct 12, the European Central
Bank said on Tuesday. Gold holdings fell because of sales by
two euro zone central banks.

In investment news, India's largest mutual fund, Reliance
Capital Asset Management Ltd, launched an exchange-traded fund
that would invest in physical gold. [ID:nBOM251499]

Sources told Reuters that the Shanghai Gold Exchange
<SGE/MENU>, China's largest precious metals bourse, will launch
forward gold contract trading for retail investors, after
failing to get approval for futures trading. [ID:nSHA312045]

Spot bullion XAU= was quoted at $755.40/756.20, down from
the New York Monday close at $758.20/759.00. London bullion
dealers fixed the afternoon spot reference price at $756.75.

Platinum futures dropped, despite supply concerns due to
possible work stoppage by South African mine workers.

South Africa's Solidarity union said wage talks with
platinum producer Lonmin (LMI.L)(LONJ.J) had bogged down after
it rejected the company's latest offer, but added there were no
imminent plans for a strike. [ID:nL16214923]

Last week, South Africa's biggest mining union, the
National Union of Mineworkers, said it planned to hold a
one-day protest against deaths and accidents at mines.

NYMEX January platinum PLF8 was down $18.40 or 1.3
percent at $1,405 an ounce. Spot platinum was quoted at
$1,408/1,412.

December palladium PAZ7 dropped $10.15, or 2.7 percent,
to $367 an ounce. Spot palladium XPD= fetched $368/372.

COMEX December silver SIZ7 was down 15.5 cents, or 1.1
percent, at $13.70 an ounce, trading between $13.60 and
$14.09.

Spot silver XAG= was quoted at $13.59/13.64, which was
lower than Monday's late New York quote of $13.77/13.82. London
silver was fixed at $13.66.