* European stock markets tumble on investor worries
* Firm dollar caps gains in gold
* Platinum slides again on fears over auto sector demand
(Recasts, updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Oct 6 (Reuters) - Gold recovered on Monday from
losses made in Asia overnight, as worries over the outlook for
the financial sector after a sharp slide in equity markets
boosted interest in gold as a haven from risk.
But gains were limited as the dollar held near a 13-month
high against the euro, denting the precious metal's appeal as a
currency hedge, and oil prices slipped more than $4 a barrel.
Spot gold <XAU=> was quoted at $839.20/841.20 an ounce at
1000 GMT, up from $834.80 in late New York trade on Friday.
Earlier it slipped nearly 1 percent as the dollar firmed.
"The initial sell-off was mainly because of the dollar,"
said Afshin Nabavi, head of trading at MKS Finance, adding that
both the dollar and the financial markets will drive the gold
market today.
European shares fell sharply in early trade after heavy
losses on Wall Street on Friday. By mid-morning, the UK FTSE 100
<> was down 5.8 percent, Germany's DAX <> off 5.7
percent and France's CAC 40 <> down 6 percent.
[]
Losses on the equity markets typically spur buying of
alternative assets, such as bullion.
But gold's gains were limited by dollar strength. The U.S.
currency extended gains against the euro, hitting a 13-month
high, as investors worried about the outlook for European banks
after leaders decided against a common bank bailout plan over
the weekend. []
The other main external driver of gold, oil, also weighed on
bullion prices. U.S. crude futures slipped more than $4 to below
$90 a barrel as traders worried efforts to avert further
financial turmoil would not stem falling demand. []
Gold usually moves in tandem with crude, as it is often
bought as a hedge against oil-led inflation.
"(People want to) own gold as a safe haven investment, but
the oil price is as low as last February," said Michael
Blumenroth, a trader at Deutsche Bank.
FIRM DEMAND
Prices are being supported by strong investment demand for
gold coins and bars, traders say, as well as interest in
bullion-backed exchange traded funds. The two main gold and
silver ETFs remain near record levels, despite recent outflows.
Holdings of the SPDR Gold Trust <GLD>, the world's largest
gold-backed ETF, eased 2 percent from last week's record highs
on Friday, according to the fund. []
The amount of metal held to back the largest silver ETF has
also slipped from record levels. The iShares Silver Trust
<SLV.A> said its holdings eased 3/4 of a percent or just over 50
tonnes week-on-week to 6,849.50 tonnes on Friday.
Silver ETFs have proved popular in recent months as lower
silver prices attract more retail investors to the market.
Spot silver <XAG=> was quoted at $11.09/11.17, unchanged
from $11.09 in late New York trade on Friday.
Among other precious metals, spot platinum <XPT=> eased to
$946/966 an ounce from $950. Earlier it slid more than 3
percent, pressured by fears slowing economic growth would dent
demand from carmakers, major consumers of the white metal.
"Prices continue to fall fast as auto sales fall," said
Fairfax analysts John Meyer. "(A) negative outlook from the
Paris auto show has not helped sales."
"ETF sales are visible and may create the appearance of a
supply surplus this year," he added.
Palladium <XPD=> slipped to $192/202 an ounce from $194.
(Reporting by Jan Harvey; editing by Christopher Johnson)
