* S&P sees sovereign ratings downgrades outpacing upgrades
* SPDR Gold ETF holdings steady at 1,028.98 tonnes
(Updates prices)
By Jan Harvey
LONDON, Feb 25 (Reuters) - Gold recovered losses on
Wednesday as stock markets retreated, with risk aversion again
rising after Standard & Poor's said that it expects to see more
sovereign ratings downgrades than upgrades this year
[].
Concern over the economic outlook for eastern Europe were
further fuelled by the agency downgrading its rating on Ukraine,
dealers said.
Spot gold <XAU=> edged up to $973.00/974.5 an ounce at 1613
GMT from $962.45 in New York late on Tuesday. It had touched a
session low of $950.50 an ounce.
Positive comments from Federal Reserve head Ben Bernanke on
Tuesday coupled with gold's failure to definitively move above
$1,000 an ounce had weighed on prices earlier in the session,
Quantitative Commodity Research consultant Peter Fertig said.
But as stock markets in Europe fell, gold started to
strengthen, he said.
"We have this ... S&P story on the economic situation again
giving gold a push to the upside," Fertig said.
The yen rallied after the news, while world stocks
retreated.
The dollar firmed against the euro as investors remained
averse to risk. []
Gold typically trends in the opposite direction to the U.S.
currency, and is often bought as an alternative asset.
However, the two have moved in line in recent weeks as both
have benefited from a flight to safety among investors. Gold
benefits when risk aversion is high as it is seen as a safe
store of value for investors.
CAPPED
However, gold's gains may be capped by fears the precious
metal's rally to 11-month highs above $1,000 an ounce last week
was overdone.
Holdings of the world's largest gold exchange-traded fund,
the SPDR Gold Trust <GLD>, were 1,028.98 tonnes for a fourth
consecutive session on Tuesday, fuelling speculation burgeoning
demand for gold to back ETFs may have stalled.
"There is no demand for gold other than investment demand
into ETFs and into small bars and coins," Commerzbank analyst
Eugen Weinberg said.
Gold buying in India picked up, however, as prices have
retreated from the record highs they hit last week. A further
dip below 15,000 rupees per 10 grams may rekindle buying
interest, dealers said. []
"We are getting calls for the first time after gold dipped
below $1,000," a dealer with a state-run bank in Mumbai said.
India's buying had tailed off as gold soared, leading some
to speculate a depression in jewellery demand could prove a
major drag on prices, despite the strength of investment buying.
On the supply side, analysts said the recent rise in gold is
likely only to slow the decline in mine production. Figures
released on Tuesday showed output in South Africa fell 13.6
percent in 2008 to its lowest in 86 years.
Spot silver <XAG=> firmed to $14.06/14.12 an ounce from
$13.74. Holdings of the largest silver-backed ETF, the iShares
Silver Trust <SLV>, were also static on Tuesday, albeit at
record levels.
Platinum <XPT=> was at $1,049/1,054 an ounce from $1,040.50,
while palladium <XPD=> was at $197/200 an ounce from $198.
(Additional reporting by Pratima Desai and James Macharia;
Editing by William Hardy)
