* European finmins decide $1 trln euro zone rescue package
* Rise in risk appetite takes heat out of safe-haven buying
* Inflation worries, rising euro, commods underpin gold
* Platinum, palladium climb as fundamentals return to fore
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, May 10 (Reuters) - Gold fell nearly 2 percent in
Europe on Monday as news of a $1 trillion emergency package to
prevent a sovereign debt crisis spreading through the euro zone
prompted investors to cash in gains after last week's rally.
The precious metal lifted from early lows at $1,183.85,
however, as investors feared the measures would ultimately prove
inflationary, and as hefty gains in the euro and other
commodities like crude oil supported prices.
Spot gold <XAU=> was bid at $1,187.75 an ounce at 0934 GMT,
against $1,207.75 late in New York on Friday. U.S. gold futures
for June delivery <GCM0> on the COMEX division of the New York
Mercantile Exchange fell $21.70 to $1,188.70 an ounce.
A $1 trillion global emergency rescue package to stabilise
the euro reversed the slide in world financial markets on
Monday. The euro <EUR=> rose 2.3 percent, while European shares
climbed more than 5 percent at the open. [] []
Bund futures fell by more than 200 ticks as markets sold
safe-haven debt after the European Central Bank said it would
buy government bonds as part of a larger rescue deal. []
"Safe-haven buying has tended to lift gold in recent weeks,
and as that comes out of the market we will see gold pull back,"
said Standard Chartered analyst Daniel Smith. "But we expect the
pull-back to be relatively mild. Gold will move higher again."
"The recent rise has clearly been linked to safe-haven
buying but we have also seen gold rally on the back of other
(assets) and commodities," he said, adding that the metal is
likely to benefit from a more inflationary environment.
The package has also left longer-term questions about
whether Europe's weakest economies can manage their debt.
[]
"These measures should... go a long way to reducing money
market tensions and helping the euro over the short-term," said
Credit Agricole in a note. "The size of the package also reduces
default and restructuring risks for European sovereigns."
"The problem is that the package may amount to a 'get out of
jail free' card for European governments," it said. "A pertinent
question is whether the crisis mechanism will keep the pressure
on governments to undertake deficit cutting measures."
PHYSICAL DEMAND PICKS UP
Falling gold prices benefited physical demand, with a 3
percent drop in Indian prices triggering buying of the metal
there ahead of a key festival, dealers said. []
India, the world's largest gold consumer, celebrates Akshaya
Tritiya on May 16, when it is considered auspicious to buy the
yellow metal for lasting prosperity.
Other commodities largely rallied on news of the European
rescue package in line with assets seen as higher risk. Oil
prices surged 4 percent on Monday, having touched a three-month
low last week, and base metals prices jumped. [] []
Precious metals of a more industrial nature than gold also
rose, with palladium <XPD=> climbing more than 3.5 percent in
early European trade and platinum <XPT=> rising 2 percent. Both
are reflecting strong underlying fundamentals, analysts said.
Platinum was later at $1,690 an ounce against $1,656.50, and
palladium at $525.50 against $510.
"Platinum and palladium have been acute losers in the
risk-off trading environment in May," said UBS analyst Edel
Tully in a note. "But since last Thursday, tentative signs of
stabilisation have emerged."
"Today we suggest that the EU mega-package will stem
contagion fears and stabilise financial markets, and that the
resulting rise in risk sentiment should lead to a relief rally
across many risk assets, including platinum and palladium."
Silver <XAG=> was at $18.35 an ounce against $18.30.
(Reporting by Jan Harvey; Editing by Amanda Cooper)
