* Dollar steadies after losses but market wary on outlook
* SPDR gold, iShares silver ETFs both report inflows
(Releads, updates prices)
By Jan Harvey
LONDON, June 2 (Reuters) - Gold edged higher in Europe on
Tuesday, recovering from earlier losses, as dealers remained
wary about the outlook for the dollar which hit its lowest level
this year in the last session.
New dollar weakness could spark buying of bullion as a hedge
against currency weakness, analysts said.
Spot gold <XAU=> was bid at $975.40 an ounce at 1009 GMT,
against $973.95 an ounce late in New York on Monday.
"Gold is certainly tracking the dollar more than anything
else," Commerzbank analyst Eugen Weinberg said.
In the medium term, he added, while weak jewellery demand
and an uptick in production could limit gold's gains later this
year, economic developments could support bullion whether they
are positive or negative for the wider markets.
"If equity markets are dropping, gold is a safe haven," he
said. "If they are rising, it is an inflation (hedge)."
The dollar steadied on Tuesday, recovering from the 2009
lows it hit as reassuring economic data and a rally in stock
markets reduced demand for the reserve currency, but underlying
sentiment towards the unit remains bearish. []
Weakness in the U.S. currency boosted dollar-priced
commodities on Monday as they became cheaper for holders of
other currencies. Oil and base metals are now easing. []
"The week is likely to be dominated by further developments
on the currency market, with the rally possibly slowing down
if the dollar holds above 79/78.5," VTB Capital analyst Andrey
Kryuchenkov said in a note.
ETF HOLDINGS RISE
Holdings of the world's largest gold and silver exchange
traded funds, New York's SPDR Gold Trust <GLD> and iShares
Silver Trust <SLV>, both rose on Monday. SPDR's holdings were up
15.27 tonnes at a record 1,134.03 tonnes. []
Buying of gold ETFs, which issue securities backed by
physical bullion, as a hedge against future risks such as
inflation, has been a major source of demand in recent months.
Market commentators fear government efforts to pump extra
liquidity into the financial system could cause a sharp rise in
inflation once an economic recovery takes hold.
Among other precious metals, silver <XAG=> was bid at $15.60
an ounce against $15.59, after touching a nine-month high of
$15.94 an ounce on Monday. Holdings of the largest silver ETF
also rose 260.36 tonnes on Monday.
Platinum <XPT=> was at $1,209 an ounce against $1,208.50,
while palladium <XPD=> was at $237 against $238. Both posted
gains on Monday amid hopes for a recovery in the car industry,
which accounts for half of global consumption of the metals.
"The platinum group metals rallied on hopes that GM's filing
for bankruptcy protection will eventually help it regain
competitiveness and ensure its survival as an auto producer,"
HSBC analyst James Steel said in a note.
"Additionally, Ford announced plans to increase Q3
production of autos and light trucks in expectation of greater
consumer demand. If global auto demand stabilizes, the PGMs are
likely to be supported, we believe."
(Editing by Sue Thomas)
