Gold rebounds as equities rally fizzles

NEW YORK/LONDON (Reuters) - Gold bounced above $900 an ounce on Wednesday as bargain hunters entered the market after a stock market rally fizzled because of scant details about plans to support the U.S. banking system.

Spot gold was at $909.85 an ounce at 2:27 p.m. EDT, up 1.5 percent from its last quote $895.80 late in New York on Tuesday.

U.S. gold futures for April delivery settled up $14.80, or 1.7 percent, at $910.70 an ounce on the COMEX division of the New York Mercantile Exchange.

Stock markets took heart after U.S. Treasury Secretary Timothy Geithner said he would move quickly to establish details about a plan to mop up banks' toxic assets.

But so far, no details have been given and an early rally of stock markets fizzled. .N .EU

"Gold has risen as the rally in U.S. equities peters out," said David Thurtell, analyst at Citigroup. "Some investors undoubtedly see prices below $900 an ounce as cheap."

Financial market turbulence and instability have seen many investors pile into gold-backed exchange traded funds in recent months, but data shows it may have tailed off.

Holdings of the SPDR Gold Trust, the world's biggest gold ETF, were unchanged at 1,028.99 tonnes on Tuesday.

SPDR's holdings have increased by less than five tonnes in the last three weeks, compared to around 200 tonnes in the first six weeks of 2009.

NEWMONT CEO EXPECTS HIGHER GOLD

Falling demand for gold jewelry is also expected to cap prices, analysts said.

Jewelry buying -- a major source of gold demand -- has been sluggish with prices near $900, especially in India. Supply of gold scrap from Turkey, the Middle East and Asia is rising.

In other supply news, the World Gold Council said signatories to the Central Bank Gold Agreement -- which include a number of European central banks and the IMF -- have sold only 80 tonnes of gold since the pact entered its fifth year in late September.

Under the terms of the agreement, the banks can sell up to 500 tonnes of gold per year.

"Unless the pace of official sector sales increases significantly, the CBGA will undershoot the 500-tonne quota by an even wider margin than it did last year," said HSBC analyst James Steel.

"Reduced central bank sales are among the most notable bullish factors in the market," he said.

Richard O'Brien, CEO of the world's No. 2 gold producer Newmont Mining Corp (NEM.N), told the Reuters Global Mining and Steel Summit in New York that he will be surprised to see gold on average below $900 this year.

Spot platinum was at $1,049.50 an ounce, up 1 percent from its previous close of $1,039.50 on Tuesday. The metal, primarily bought by industrial users, has suffered from expectations a recession will weigh heavily on demand.

Spot palladium traded at $196.00 an ounce, up 0.3 percent from its late Tuesday New York quote of $195.50, while spot silver was at $12.79 an ounce, up 1.8 percent from its Tuesday finish of $12.57.