* 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 over 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 $1,144.95 an ounce at 1600 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. []
Tom Kendall, precious metals strategist at Mitsubishi said
gold's bull run was not over, but there was scope for further
liquidation for bullion after its breathless rally since
end-October.
"I would sum this up as a reality check for the gold
market," he said. "We have seen a number of disappointments over
the last few days in terms of economic data -- Japanese GDP,
German industrial production -- and a drop in SPDR holdings" he
said.
"It's going to be a little while before we challenge the
highs that we saw last week," he said.
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.
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.
"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.
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. []
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 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 higher at
$1,145.80 an ounce versus $1,143.40 an ounce.
Among other precious metals, silver <XAG=> was bid at $17.82
an ounce against $17.59, platinum <XPT=> was at $1,425.50 an
ounce against $1,410 and palladium <XPD=> at $366 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)
