* Gold recovers after biggest one-day fall since Nov. 12
* Caution haunts financial markets ahead of U.S. growth data
* Coming up: U.S. advance Q4 GDP data at 1330 GMT
(Updates prices, adds comment, detail)
By Jan Harvey
LONDON, Jan 28 (Reuters) - Gold surrendered gains on Friday
after data showed the U.S. economy expanded in the fourth
quarter, though at a slightly slower pace than expected,
underpinning expectations the U.S. recovery is gaining traction.
Spot gold <XAU=> was bid at $1,311.85 an ounce at 1433 GMT
against $1,312.24 late in New York on Thursday, well off a high
of $1,318.10 an ounce. U.S. gold futures for February delivery
<GCG1> fell $6.80 to $1,311.60.
The metal earlier touched a four-month low of $1,308.00 an
ounce, having fallen 2.6 percent on Thursday on a run of firmer
than expected U.S. economic data which boosted confidence in the
recovery. Though gold later recovered, it still looks fragile.
"Though the GDP data came in slightly below expectations...
(its acceleration) was driven by two factors which are very
important when looking forward, and that is the more important
factor in assessing the future course of the U.S. economy," said
Quantitative Commodity Research consultant Peter Fertig.
"That is private consumption and exports, which came in
better than expected," he said. "With the Dow Jones index
trading this week above 12,000, that all indicates that the U.S.
economy is on an expansionary path."
The U.S. economy gathered speed in the fourth quarter,
though a touch below expectations, with the biggest gain in
consumer spending in more than four years and strong exports
offering the clearest signals yet that a sustainable recovery is
underway. []
The dollar extended gains versus the euro and trimmed losses
against the yen in volatile trading on Friday after the data,
while European shares lifted from lows and New York stocks
opened slightly higher on Wall Street. [] []
"One of the dangers in the gold price this year is that if
confidence rises, and U.S. growth and the economic recovery
continues, gold's allure as a hedge against risk is somewhat
diluted," said VM Group analyst Carl Firman.
"At the moment you probably find that money is going into
riskier assets, perhaps with higher returns."
ETF INVESTMENT EASES
Investment demand for gold has been soft this year, with
holdings of the SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, down another 3 tonnes on Thursday.
London's ETF Securities reported a 1.3-tonne outflow from
its gold exchange-traded products on the same day.
The Wall Street Journal said on Friday hedge fund SHK Asset
Management liquidated a U.S. gold futures position this week
valued at over $850 million, more than 10 percent of the main
U.S. futures market. []
While the outlook for ETF and futures investment is
uncertain, physical demand for gold, particularly from Asia, is
expected to be a major factor underpinning prices this year.
"The China Gold Association estimates... that the demand for
gold in the first half of the year will rise by 15 percent year
on year, citing growing demand for alternative investments and
protection against inflation," said Commerzbank in a note.
"Already last year, China's gold demand posted double-digit
growth, according to the World Gold Council," it said.
Spot silver <XAG=> was bid at $26.75 an ounce against
$26.88. Holdings of the world's largest silver-backed ETF, the
iShares Silver Trust <SLV>, fell to 10,426.43 tonnes on Thursday
from 10,447.70 tonnes.
"Silver ETF holdings fell by 122 tonnes on the week (and)
are down 550 tonnes from their peak," said RBS Global Banking &
Markets in a weekly report. "ETF holdings represent 66 percent
of 2010 world mine output."
Platinum <XPT=> was at $1,782.74 an ounce against $1,781 and
palladium <XPD=> was at $802.47 against $802.22.
(Reporting by Jan Harvey; editing by Keiron Henderson)
