* Gold pares gains as dollar recovers early losses
* SPDR gold ETF holds record, iShares silver sees outflows
(Updates prices)
By Jan Harvey
LONDON, June 3 (Reuters) - Gold was steady in Europe on
Wednesday, having pared early gains as the dollar recovered lost
ground versus the euro, denting interest in the metal as a hedge
against weakness in the U.S. currency.
Spot gold <XAU=> was bid at $981.90 an ounce at 1056 GMT,
against $980.85 an ounce late in New York on Tuesday. Earlier it
touched a high of $989.80.
Commerzbank trader Rory McVeigh said while dollar weakness
helped support gold, the metal was likely to encounter heavy
resistance on its way up to the key $1,000 mark.
"The problem is that these are speculative longs, and as we
get towards $1,000 an ounce, you will get waves of selling as
people take money off the table," he said.
The dollar rose to session highs against the euro after
sources told Reuters that a downgrade in U.S. sovereign credit
ratings would not discourage Asian central banks from buying
U.S. Treasuries. []
Earlier the U.S. currency hit a five-month trough against
the euro as traders sold the unit in favour of higher-yielding
currencies on growing hopes the economy may be recovering from
its lows.
Traders eyed a welter of data due out in the United States
later in the session -- including ADP and Challenger jobs data,
the ISM May non-manufacturing index and the April factory orders
report -- for their impact on the currency markets.
RECORD LEVELS
Investor interest in the metal remained relatively firm.
Holdings of the SPDR Gold Trust exchange-traded fund were at
record levels on Tuesday, while ETF Securities said holdings of
its GBS ETF <GBSx.L> rose more than 7,000 ounces that day.
Gold demand in India, the world's biggest bullion consumer,
stayed weak on Wednesday as high prices dampened buying
interest. []
Silver <XAG=> was at $15.99 an ounce against $15.94. The
world's largest silver exchange-traded fund, the iShares Silver
Trust <SLV>, said its holdings dipped by 3.11 tonnes on Tuesday,
but remain near record levels. []
Spot platinum <XPT=> was quoted at $1,248.50 an ounce
against $1,238.50 late in New York on day, while spot palladium
<XPD=> was at $248.50 against $246.50.
Both remained depressed by the lacklustre outlook for the
car industry, consumer of around half global supply of the
metals.
Data released on Tuesday showed U.S. auto sales fell nearly
34 percent in May from a year earlier, but aggressive
discounting helped steady results. []
"Although U.S. auto sales remain weak, data for May showed
some improvement from April, which we believe helped support
platinum group metals prices," said HSBC in a note.
"Even a mild upturn in auto demand may spur the PGMs to
rally further, as production cutbacks have reduced supply."
(Reporting by Jan Harvey; Editing by William Hardy)
