* Jewellery demand ticks up as prices decline; equities slip
* Dollar strengthens to 1-month high versus the euro
* SPDR gold ETF sees second consecutive daily outflow
(Updates prices)
By Jan Harvey
LONDON, April 20 (Reuters) - Gold firmed in Europe on Monday
as last week's price fall tempted jewellery and other physical
buyers back to the market and as stock markets weakened, but a
firmer dollar kept a lid on gains.
A second consecutive daily decline in holdings of the
world's largest gold-backed exchange-traded fund, New York's
SPDR Gold Trust, has also raised fears investors are selling the
metal to buy back into other assets such as stocks.
Spot gold <XAU=> was bid at $871.45 an ounce at 1130 GMT,
against $867.90 an ounce late in New York on Friday.
"There are bargain hunters lined up," said Afshin Nabavi,
head of trading at MKS Finance in Geneva. "Demand is picking up.
India seems to be hungry for gold prior to the wedding season."
"Overall the physical demand at these levels is becoming a
bit more interesting."
Gold demand in India, the world's biggest jewellery buyer,
remains firm as traders stock up ahead of the Akshaya Tritya
festival on April 27, with lower prices encouraging the trend.
[]
Prices slipped 1.5 percent last week, hurt by a recovery in
the equity markets amid tentative expectations the economic
slowdown may be bottoming out.
The SPDR Gold Trust ETF <GLD> saw its largest two-day
outflow since early September last week, with its total holdings
declining 21.7 tonnes or nearly 2 percent on Thursday and
Friday. []
London's ETF Securities also said holdings of its three
gold-backed exchange-traded commodities dipped 1.0 percent last
week. []
This has raised fears investors are selling their ETF
holdings to buy back into so-called riskier assets like stocks.
If this trend continues, the pressure on price exerted by
the release of gold stocks onto the market is likely to
overwhelm firmer jewellery demand.
ALTERNATIVE
A recovery in the dollar is also weighing on gold, which is
often bought as an alternative investment to the U.S. currency.
The unit hit a one-month high against the euro as losses in
equities prompted buying of the dollar as a haven. []
"The dollar remains surprisingly strong, surging towards 86
points on a trade-weighted basis," said VTB Capital analyst
Andrey Kryuchenkov in a note. "A break above this resistance
would be very bearish for gold and could trigger more losses."
"For now, a sustained close below $865 would signal a
heavier sell off," he added. "All focus will be on the equity
markets this week, though."
European shares were lower at midday after rising for six
straight weeks, with banks down ahead of results from Bank of
America <BAC.N>. []
Traders are awaiting the release of U.S. leading indicators
data at 1400 GMT for direction.
Among other precious metals, spot platinum <XPT=> was bid at
$1,179.50 an ounce against $1,204.50, while spot palladium
<XPD=> was bid at $230.50 an ounce against $231.
The stronger dollar is prompting some profit taking in
platinum after its recent price recovery, traders said, while
worries persist over the outlook for the auto industry, the main
buyer of the precious metal.
Rhodium <RHOD-LON> bucked the trend to rise $50 an ounce to
$1,550, as hopes the downturn in the car industry is bottoming
out prompted industrial users to rebuild stocks. The metal has
broken out of its range to rise 35 percent in the last week.
Silver <XAG=> was bid at $12.04 an ounce against $11.84.
(Editing by Keiron Henderson)
