* Dollar retreats from 1-mth high vs euro to turn lower
* Oil prices bounce back after $1/barrel fall
* SPDR gold ETF records biggest one-day outflow since July
(Updates with fresh comments, changes dateline from TOKYO)
By Jan Harvey
LONDON, Dec 9 (Reuters) - Gold rose nearly 1 percent in
Europe on Wednesday, recovering from the three-week lows it hit
in the previous session, as the dollar weakened against the euro
on concern selling of the single currency had been overdone.
Spot gold <XAU=> was bid at $1,139.60 an ounce at 1018 GMT,
against $1,129.30 late on Tuesday. The metal hit a low of
$1,125.15 an ounce late in that session as the dollar firmed.
But Standard Bank analyst Walter de Wet said gold will
likely struggle to return to the record highs of $1,226.10 an
ounce it hit last week before the end of the year.
"We will see more upside in gold, but we don't think we will
see it in the next few weeks," he said.
"There are worries about the euro... (and) at the end of the
year people have less risk appetite, so overall I can't see
people piling into precious metals."
Gold slipped on Tuesday as the U.S. currency rose to
one-month highs against the euro, with investors unwinding
positions in riskier assets ahead of the year-end, prompted in
part by rising debt woes for Greece and Dubai.
But the single currency bounced back against the dollar
later on Wednesday as investors sensed selling of the euro had
been overdone. []
Weakness in the dollar boosts gold's appeal as an
alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies.
Among other assets, oil prices also edged higher after
falling more than $1 a barrel the previous day, supported by
industry data showing a big drop in U.S. crude stocks. []
Gold tends to track crude prices, as the metal can be bought
as a hedge against oil-led inflation. For a graphic on gold's
relationship with inflation, click on
http://graphics.thomsonreuters.com/129/GLD_TPSS1209.gif
RISK AVERSION
Elsewhere, risk aversion spread over into equities. European
shares were lower in early trade, while Japan led a slide in
Asian stocks as worries about the strength of a global recovery
prompted investors to trim bets ahead of year-end. []
On the demand side, the world's largest gold-backed
exchange-traded fund, the SPDR Gold Trust <GLD>, said its
holdings fell 13.719 tonnes to 1,116.247 tonnes on Tuesday,
their biggest one-day drop since mid-July. []
The SPDR gold ETF is the world's sixth largest bullion
holder, according to World Gold Council data dated September,
ahead of China, Japan and Switzerland.
ETFs issue securities backed by physical stocks of an asset
such as gold, giving investors exposure to the underlying price.
Buying of gold ETFs represented a major tranche of demand
earlier this year.
But gold is finding good support from smaller-scale physical
demand, which is emerging as prices fall, analysts said. Buyers
in major bullion markets such as India have been put off this
year by the high cost of gold.
"The downside is limited and the much-needed correction is
likely to be followed by subdued trading for the rest of the
month," said VTB Capital analyst Andrey Kryuchenkov in a note.
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange eased $1.20 to
$1,142.20 an ounce.
Among other precious metals, silver <XAG=> was bid at $17.77
an ounce against $17.59, platinum <XPT=> was at $1,425.50 an
ounce against $1,410 and palladium <XPD=> at $370 against $367.
Russia's Norilsk Nickel, the world's biggest palladium
producer, said there would be no reduction in its platinum and
palladium output next year. []
(Editing by James Jukwey)
