* Euro recovers from three-week low versus dollar
* Fitch downgrades Portugal's currency ratings by one notch
* SPDR gold ETF heads for biggest weekly outflow since July
(Updates prices)
By Jan Harvey
LONDON, Dec 24 (Reuters) - Gold prices edged higher in
Europe on Friday, supported by the euro's recovery from a
three-week low versus the dollar, and as a further ratings
downgrade stoked concerns over euro zone debt.
Fitch Ratings downgraded Portugal's long-term and local
currency ratings by one notch to A-plus late on Thursday, with a
negative outlook. []
Spot gold <XAU=> was bid at $1,384.25 an ounce at 1302 GMT,
against $1,379.89 late in New York on Thursday.
Trading is thin as the markets wind down for the Christmas
holidays, which begin on Friday afternoon in Europe. Little
activity is expected ahead of the break, which lasts until Dec.
29 in many jurisdictions.
"Whilst I think we might see gold between now and Jan. 4
down $20, I think that is going to prove to be the baseline,"
said ANZ Bank analyst Peter Hillyard. "I think as the market
resumes in a proper way in the first week of January, we will
see it tracking back through $1,400."
"There are very real fears that the problems of the euro
zone generally are not going to be suddenly swept away," he
added. "All of these are things that make people believe that
holding a tangible asset is still the right thing to do."
The euro <EUR=> steadied on Friday, recovering after hitting
its lowest in three weeks versus the dollar, but the currency
was still on track for a third consecutive weekly loss. []
Gold typically comes under pressure from a softer euro and
consequently stronger dollar, but its usual close inverse
relationship with the U.S. currency has weakened this year as
both assets have benefited from the euro zone debt crisis.
The euro has fallen more than 8 percent this year, while
gold prices have risen by more than a quarter.
DEBT CRISIS STILL CENTRE STAGE
The single currency managed to shrug off Fitch's downgrade
of Portugal, which analysts said was broadly expected.
However, it is still likely to keep the euro zone debt
crisis at centre stage heading into the new year, analysts said.
European shares dipped on Friday, though they are set to post
their best December performance in a decade. []
Among other commodities, oil prices climbed to their highest
in two years on Friday as the cold snap fuelled distillates
demand, while copper rose, supported by upbeat U.S. data and
supply concerns. [] []
On the investment side of the gold market, the world's
largest gold-backed exchange-traded fund, the SPDR Gold Trust
<GLD>, said its holdings slipped to 1,284.973 tonnes on Thursday
Its holdings have declined by nearly 14 tonnes so far this
week, and are on track for their biggest one-week loss since
late July.
From a technical perspective, gold prices remain
well-supported around the $1,363 level, analysts said, while a
break of resistance at $1,408 is likely to send prices back
towards December's record high above $1,430.
"The charts suggest a break-out could be brewing for gold
and silver, with the run-up to year end potentially throwing up
a few surprises," said TheBullionDesk.com in a note.
Among other precious metals, silver <XAG=> was bid at $29.21
an ounce against $29.31. The world's biggest primary silver
producer, Mexico's Fresnillo <FRES.L>, said it has no plans to
start hedging against silver price changes as shareholders say
they prefer exposure to market prices. []
Platinum <XPT=> was at $1,712 an ounce against $1,716.50,
while palladium <XPD=> was at $749.50 against $750.49.
(Reporting by Jan Harvey; Editing by Sue Thomas)
