* Risk appetite returns to markets on hopes for EU rescue
* Platinum group, silver rebound after sharp declines
* COMEX open interest rises to record high
* Coming up: U.S. Consumer Prices on Wednesday
(Recasts, adds comments, updates prices, adds second byline,
dateline, previous LONDON)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, May 18 (Reuters) - Gold prices dropped
Tuesday on diminishing safe-haven demand as investors' appetite
for risk returned on hopes that a European rescue to resolve
the region's debt crisis would work.
Platinum group metals, which have a strong industrial
demand component, rebounded after the previous session's sharp
declines. Worries that austerity steps in the euro zone could
hamper growth, however, pressured prices, analysts said.
Gold prices recovered from earlier lows below $1,210 an
ounce as investors' interest remained piqued by the prospect of
of sovereign debt risks spreading beyond the euro zone.
"The fact that Greece has actually received some of the aid
package has probably taken some heat out of the market, but we
still have to see if the aid is a cure, or just a temporary
sticking plaster (bandage)," said Societe Generale analyst
David Wilson.
Spot gold <XAU=> was at $1,217.95 an ounce at noon EDT
(1600 GMT), against $1,223.00 late in New York on Monday.
U.S. gold futures for June delivery <GCM0> on the COMEX
division of the New York Mercantile Exchange fell $10.10 to
$1,218.00 an ounce.
COMEX open interest rose almost 15,000 lots to an all-time
high above 600,000 lots as of May 17, indicating rising
volatility as prices held near record highs, traders said.
<NYMMTLFUT/VOI>
Contagion fears about Greece's debt crisis drove gold to a
record $1,248.95 an ounce last week and knocked other assets
lower.
On Tuesday, investors were cheered by news that aid for
Greece was arriving as planned, after officials said the
country received a 14.5 billion euro emergency loan from the EU
and would use some of the money to repay an 8.5 billion euro
bond. [].
The euro <EUR=> rose, after tumbling to a four-year low
against the dollar on Monday, as risk aversion receded, while
global equity markets steadied after they rallied earlier in
the day. [] [] []
Oil prices also recovered some of their recent losses to
climb more than 1 percent as risk appetite returned, with
dollar weakness and strong Chinese demand helping prices rise.
Industrial metals also jumped. [] []
However, independent investor Dennis Gartman said he was
abandoning his long-held strategy of buying gold relative to
non-U.S. currencies, such as the euro, due to rising market
volatility. []
ETF INVESTMENT FIRM
Investment demand for gold remained high, with holdings of
the world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD>, rising just over three tonnes on
Monday to a record 1,217.108 tonnes. []
Among other precious metals, silver <XAG=> rose to $18.95
from $18.75 an ounce. Platinum <XPT=> was at $1,681.50 an ounce
against $1,666, and palladium <XPD=> was at $502.50 against
$504.
London's Platinum Week entered its second day on Tuesday,
with analysts, traders, refiners and recyclers meeting in the
British city to discuss industry developments. []
Refiner Johnson Matthey initiated proceedings on Monday
with the release of its Platinum 2010 report, in which it said
it expected the market to move closer to balance this year
after swinging into a surplus of 285,000 ounces last year.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic showing Johnson Matthey's evaluation of platinum
market's supply and demand fundamentals, click on:
http://link.reuters.com/cyn84k
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Platinum and palladium encountered heavy selling on Monday,
along with other industrial metals, led by copper's 6 percent
fall, but have since regained some lost ground.
Prices at 12:26 p.m. EDT (1626 GMT)
Last Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1215.50 -12.60 -1.0 1096.20 10.9
US silver <SIN0> 18.945 0.086 0.5 16.845 12.5
US platinum <PLN0> 1685.50 22.30 1.3 1471 14.6
US palladium <PAM0> 504.25 0.65 0.1 408.85 23.3
Gold <XAU=> 1214.65 -8.35 -0.7 1096.35 10.8
Silver <XAG=> 18.95 0.20 1.1 16.84 12.5
Platinum <XPT=> 1680.50 14.50 0.9 1465.50 14.7
Palladium <XPD=> 502.50 -1.50 -0.3 405.50 23.9
Gold Fix <XAUFIX=> 1216.75 1.75 0.1 1104 10.2
Silver Fix <XAGFIX=> 18.82 -29.00 -1.5 16.99 10.8
Platinum Fix <XPTFIX=> 1681.00 6.00 0.4 1466 14.7
Palladium Fix <XPDFIX=> 507.00 4.00 0.8 402 26.1
(Editing by Walter Bagley)
