* Spot gold rises to $884.95 per troy ounce <XAU=>
* Risk sentiment shaken as global stocks retreat
* Dollar index strengthens to 1-month high <.DXY>
* SPDR gold ETF sees second consecutive daily outflow
(Adds quotes, updates prices)
By Jan Harvey and Veronica Brown
LONDON, April 20 (Reuters) - Gold rose sharply in Europe on
Monday, with falling stock markets and banking sector concerns
tempting investors back towards the metal as caution towards
riskier assets reared again.
Global stocks slipped <.MIWD00000PUS>, heavily influenced by
a slide in U.S. shares on worries that problems persist for the
struggling banking sector and after Bank of America Corp <BAC.N>
reported a big increase in troubled loans. []
Spot gold rose 1.8 percent to 883.50 per troy ounce, having
earlier hit a session high of $884.95 and compared with $867.90
quoted late in New York on Friday. The market was set or "fixed"
in London on Monday afternoon at $877.00.
"Concerns about the banking sector have put equities under
pressure and caused investors to look out for gold as a
traditional safe haven," said Alexander Zumpfe, precious metals
trader at Heraeus.
Further gains were kept in check however as the dollar rose
against the euro and other leading currencies, making
dollar-priced bullion more expensive for overseas investors.
Falls in the gold price last week also served to tempt
jewellery and other physical buyers back to the market.
"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."
INVESTMENT OUTFLOW
Aside from Monday's price moves, a second consecutive daily
decline in holdings of the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust, raised fears
investors have been steadily selling the metal to buy back into
other assets such as stocks.
The SPDR Gold Trust ETF 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.
But traders and analysts were relatively sanguine on the
investment flows.
"I don't think that we are at a crucial situation,
considering that we had massive inflows over the previous months
so it was pretty obvious that there had to be some liquidation
at some point of time," Heraeus' Zumpfe said.
Among other precious metals, spot platinum was bid at
$1,176.50 an ounce against $1,204.50, while spot palladium was
bid at $227.50 an ounce against $231.
Dealers said dollar strength and wider concerns about
economic growth stemming from the equity market losses had
dented platinum after its recent price recovery.
Rhodium bucked the trend to rise $50 an ounce to $1,550
<RHOD-LON>, 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 was bid at $12.06 an ounce against $11.84, rising in
tandem with gold.
(Editing by Peter Blackburn)
