February 13, 2009 / 11:17 AM / 11 years ago

PRECIOUS-Gold slips as financial fear recedes; GLD jumps

* GLD holdings rise to record above 970 tonnes

* Total gold ETF holdings up 200 tonnes this year

* Long-term inflation fear, investment demand support gold (Recasts, updates with quotes, closing prices, adds NEW YORK to dateline)

By Frank Tang and Pratima Desai

NEW YORK/LONDON, Feb 13 (Reuters) - Gold prices slipped on Friday as fears of financial meltdown receded, but analysts say investors expecting only a brief respite from the maelstrom will carry on piling into the precious metal.

Traders said short-term investors selling their holdings ahead of a U.S. holiday on Monday weighed on gold.

Firmer equities and news that the United States was working on a program to subsidize mortgages for homeowners before they fall into loan arrears also hit gold market sentiment.

Rising hopes of financial stability prompted a bout of profit-taking which took spot gold XAU= to a session low of $931.40 an ounce.

Bullion was at $937.80 an ounce at 2:02 p.m. EST (1902 GMT), down 0.8 percent from the last trade $945.05 late in New York on Thursday.

U.S. gold for April delivery GCJ9 settled down $7.00 at $942.20 an ounce on the COMEX division of the New York Mercantile Exchange.

“ A lot of bad news, for this week at least, seems to have been priced in,” said Michael Widmer, analyst ay BNP Paribas.

The escalating crisis in the banking sector has pushed up gold prices by about 40 percent since late October last year.

Higher prices are reflected in the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust (GLD), popularly known as GLD. The fund’s holdings reached a record above 970 tonnes as of Feb. 12, a 30 percent jump since the end of October.

“It tells you how worried people are about the state of our financial system. When you see gold making new highs in many different currencies, it shows that a lot of people are worried about the printing of money by governments,” said Joseph Foster, portfolio manager of the $550 million Van Eck International Investors Gold Fund in New York.

Investors expecting years of inflation and global economic instability are pouring money into securities backed by gold bullion, helping to turn a simple safe haven into a mainstream asset class. [ID:nN13342040]

Many traders think a new record could be set should inflation take off next year because of the large amounts of money being pumped into the global economy by central banks and governments to boost growth and confidence.

Spot gold hit a record at $1,030.80 last March.

Commerzbank said in a note that GLD’s gold holdings were now close to the level of those of the world’s sixth largest holder of gold, the Swiss National Bank, which held 1,040 tons of gold in its vaults at the end of December.

Spot platinum XPT=, tracking gold, also slipped to $1,059 an ounce, down 1.3 percent from its last finish of $1,073 an ounce.

The metal used in autocatalysts to clean car emissions is expected to stay under pressure.

Palladium XPD= was at $214 an ounce, up 0.2 percent from its previous close of $213.50, and silver XAG= was at $13.60 an ounce, up 1 percent from its previous close of $13.46 on Thursday. (Editing by Christian Wiessner)

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