* Dollar retreats from highs versus currency basket
* Oil, industrial commodities steady after slip
(Updates throughout, changes dateline-pvs TOKYO)
By Jan Harvey
LONDON, July 7 (Reuters) - Gold inched higher in Europe on
Tuesday as the dollar pared gains against a basket of
currencies, with traders awaiting new direction from the foreign
exchange markets after a meeting of G8 leaders later this week.
Spot gold <XAU=> was bid at $925.40 an ounce at 0945 GMT,
against $924.00 an ounce late in New York on Monday. With
physical demand sluggish despite a price dip, the gold market is
largely being driven by currency moves, traders said.
The market is looking for any comments on the dollar's role
as the global reserve currency at the Group of Eight leaders'
meeting starting tomorrow, which could impact on the foreign
exchange markets and consequently on gold.
"Gold at the end of last week and the beginning of this got
caught up in the more pessimistic view on the economic front,
and along with other commodities turned lower," said Simon
Weeks, director of precious metals at the Bank of Nova Scotia.
"Obviously we have the G8 this week where there is potential
for some discussion about the reserve currency... which could
have an impact on the currency markets and indirectly on the
(gold) price," he said.
Technically, the picture is looking weaker, with gold's
trade down through the 100-day moving average opening up the
potential for a move down to $915, he added.
The precious metal managed to lift off lows on Tuesday,
however, as the dollar <.DXY> gave up early gains against a
basket of currencies, with the euro sharply paring losses
against the U.S. currency. []
A stronger dollar reduces interest in bullion as a currency
hedge and makes the metal more expensive for holders of other
currencies.
RECOVERY
Among other commodities, oil prices also recovered from the
five-week lows they struck on Monday, while industrial metals
steadied after the previous day's losses. [] []
Investment demand remained relatively soft, with holdings of
the largest gold-backed exchange-traded fund, the SPDR Gold
Trust <GLD>, easing 0.36 tonnes on Monday. []
Switzerland's Zurich Cantonal Bank, however, reported modest
inflows into its gold and silver ETFs last week. []
Physical demand for bullion bars has improved slightly in
the last week or so, dealers say, but is far from its peak.
"We have seen a bit more demand from investors, starting
last week, for investment bars," said Wolfgang
Wrzesniok-Rossbach, head of sales at precious metals trading
house Heraeus.
"But we are far from a situation seen in the winter when we
had delivery periods for most bar types."
Among other precious metals, silver <XAG=> was at $13.26 an
ounce against $13.24, tracking the uptick in gold. Platinum
<XPT=> was at $1,141.50 an ounce against $1,143, while palladium
<XPD=> was at $240.50 against $239.
Both platinum group metals (PGM) have suffered from the
downturn in the car industry, their main consumer. Any sign of a
recovery in the sector could trigger a recovery, analysts said.
"Based on reduced supply and signs that global auto demand
is bottoming out, we believe the PGMs could soon recover from
recent losses," HSBC analyst James Steel said in a note.
(Reporting by Jan Harvey; Editing by Anthony Barker)
