* 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
(Adds comment, updates prices)
By Jan Harvey
LONDON, Dec 9 (Reuters) - Gold rose 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 $1,142.60 an ounce at 1335 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 rose, some
8 percent below the record $1,226.10 it hit on Dec. 3.
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. []
Simon Weeks, head of precious metals at the Bank of Nova
Scotia, said while gold had found support, its correction may
have further to run.
"$1,125 is the 50 pct retracement of the overall move from
$1,025 to... the high," he said. "We have held there twice, and
with the forex market move, we have had a bounce since, but with
the ETFs losing 15 tonnes yesterday, there is definitely some
liquidation around at the moment."
"For the time being, we definitely need to have this
correction, and we'll probably extend down to $1,068-1,070
before it is complete," he added.
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.
DOLLAR SLIPS
On the currency markets, the euro rose against the dollar on
Wednesday, recovering from its lowest in more than a month after
Greece's credit rating was downgraded the previous day, as
investors decided selling 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 rose 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
Standard Bank analyst Walter de Wet said gold will likely
struggle to return to its highs 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."
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange were unchanged at
$1,143.40 an ounce.
Among other precious metals, silver <XAG=> was bid at $17.80
an ounce against $17.59, platinum <XPT=> was at $1,419.50 an
ounce against $1,410 and palladium <XPD=> at $365 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 Keiron Henderson)
