* Dollar cedes ground to euro after Thursday's surge
* SPDR gold ETF holdings hold steady
* Indian gold consumers awaiting lower prices to buy-dealers
(Updates prices, adds graphic)
By Jan Harvey
LONDON, Dec 18 (Reuters) - Gold rose 1 percent in Europe on
Friday, recouping some of the previous session's hefty 3.5
percent losses, as the dollar ceded some ground after hitting a
3-1/2 month high against the euro in the previous session.
Spot gold <XAU=> was bid at $1,109.60 an ounce at 1200 GMT,
against $1,097.80 late in New York on Thursday. U.S. gold
futures for February delivery <GCG0> on the COMEX division of
the New York Mercantile Exchange rose $3.70 to $1,111.10.
Prices have found good support around $1,080-1,100, analysts
say, but they may be vulnerable to further losses through to
year-end, especially if further dollar strength is seen.
"Trading will be relatively thin in the coming days so
investors may be reluctant to take on positions in this market,
and may be closing some positions," said Commerzbank analyst
Eugen Weinberg.
"As most investors have been on the positive side, the
closure of those long positions might dampen sentiment and might
dampen prices."
Currency effects also weighed on gold, with the dollar
ceding some ground to the euro. The single currency fell to its
lowest since early September on Thursday after S&P became the
second ratings agency this month to downgrade Greece. []
Weakness in the U.S. unit boosts gold's appeal as an
alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies.
Gold found good support after its slide to near 6-week lows
yesterday. "So far the metal has however managed to stay above
the support level of $1,080 an ounce," said precious metals
trading house Heraeus in a weekly report.
TESTED
"Whether this level will be tested before Christmas depends
mainly on the U.S. dollar," it said. "Should this continue to
gain further, gold could come under further pressure."
"However should (it) stabilise or perhaps lose value again,
gold could then consolidate between $1,110 and $1,140 an ounce."
Other commodities also benefited from the dollar's retreat,
with industrial metals such as copper ticking higher and oil
prices rising back above $73 a barrel. Gold tends to track
crude, as the metal can be bought as a hedge against oil-led
inflation. [] []
For graphic showing gold's relationship with inflation,
click: http://graphics.thomsonreuters.com/129/GLD_TPSS1209.gif
On the investment side of the market, the SPDR Gold Trust
<GLD>, the world's largest gold-backed exchange-traded fund,
said its holdings were unchanged on Thursday. []
Swiss bank Julius Baer <BAER.VX> said it expects to see an
outflow of 30,000 ounces or 1.5 percent from its gold-backed
exchange-traded product to decline on Friday.
Meanwhile in India, the world's biggest bullion consumer
last year, spot gold prices fell on Friday as buyers continued
to stay away expecting a further dip in prices, dealers said.
[]
Among other precious metals, silver <XAG=> was bid at $17.29
an ounce against $17.13.
"Silver again looked to gold for direction (on Thursday),
falling a similar 3 percent to the yellow metal as steady offers
were seen across the day," said TheBullionDesk analyst James
Moore.
"The metal remains supported above $17 an ounce so far this
morning and will be looking closely to both gold and the dollar
in the coming sessions, with a failure to hold last week's low
of $16.90 potentially leading to a deeper correction."
Meanwhile platinum <XPT=> was at $1,432 an ounce against
$1,421, and palladium <XPD=> was at $366 against $359.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
