* Gold prices firm as dollar comes under pressure
* Indian gold buying continues after price decline
* Platinum, palladium correct after hefty gains
(Updates, adds comment, changes dateline from TOKYO)
By Jan Harvey
LONDON, Jan 22 (Reuters) - Gold firmed in Europe on Friday
as the dollar fell broadly, retreating from six-month highs
versus the euro, after U.S. President Barack Obama proposed
tough new rules to limit financial risk-taking by banks.
Gold and other commodities initially slid on the news, amid
fears the proposed new restrictions could limit investment flows
into commodities. However, the dollar's slip eventually helped
prices to recover. []
Spot gold <XAU=> was bid at $1,096.25 an ounce at 1039 GMT,
against $1,094.20 late in New York on Thursday. In that session
it tumbled to a three-week low of $1,088.30 an ounce.
"The dollar has been the driving force (for gold)," said
Peter Fertig, a consultant with Quantitative Commodity Research.
He said while gold and other commodities had overreacted to
the Obama news: "Uncertainty about U.S. financial system
regulation is a factor which might be in the market for some
time, until there are concrete details."
President Obama's announcement on Thursday of new proposals
to limit risk-taking by Wall Street banks knocked stocks and
commodities, including gold, that session. []
But the precious metal made up some lost ground on Friday as
the dollar retreated, with investors pausing to assess what the
White House plan meant for the dollar and U.S. assets. []
Strength in the U.S. unit curbs gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies.
Oil also recovered to top $76, up from one-month lows after
data showed refiners in the United States processed the least
crude in decades, reacting to a fuel demand slump. Prices fell
earlier as talk of bank trading curbs upset speculators. []
Gold tends to track crude prices, as the metal can be bought
as a hedge against oil-led inflation.
Elsewhere Indian gold buyers continued to take advantage of
falling prices on Friday, with more buying expected if bullion
continues to fall. "Traders mostly will look at buying below
$1,070," said one dealer with a private bank in Mumbai.
[]
LACKLUSTRE
Investment demand was lacklustre, with holdings of New
York's SPDR Gold Trust <GLD> exchange-traded fund unchanged for
a second session on Thursday. []
The World Gold Council said in a report released in Asia on
Friday that it expects demand for the metal to remain strong in
2010 after a pick-up in the fourth quarter of last year.
"Investors concerned about price stability, the spectre
of inflation and the outlook for the U.S. dollar (will) seek
ways to protect their wealth," said Juan Carlos Artigas, the
WGC's investment research manager, in a statement.
"The WGC estimates that just 1 per cent of global assets are
invested in gold, leaving ample scope for further growth in
investor allocations," he added.
Among other precious metals, silver <XAG=> firmed, tracking
the recovery in gold, to $17.44 an ounce against $17.35.
Platinum <XPT=> was at $1,554 an ounce against $1,593, while
palladium <XPD=> was at $434 against $449.
Platinum group metals, which are primarily industrial in use
but have benefited from strong investment demand in recent weeks
after the launch of exchange-traded funds in New York, are
posting the biggest declines of the sector on Friday.
The metals, particularly palladium, are correcting after
hefty gains seen earlier in the year.
"Palladium had outperformed going up and is suffering a
delayed reaction," said Mitsubishi Corp precious metals
strategist Tom Kendall. "It doesn't have the same degree of
support from buyers of physical as does platinum."
(Reporting by Jan Harvey; Editing by Keiron Henderson)
