* Inflation in spotlight as China hikes interest rates again
* Metal holds onto previous day's 1 pct short-covering gains
* Platinum, palladium rally to multi-year highs
(Updates prices, adds comment)
By Jan Harvey
LONDON, Feb 9 (Reuters) - Gold held close to the previous
session's near three-week high on Wednesday, supported by an
increased focus on inflation after China's second interest rate
hike in six weeks and residual interest in the metal as a haven.
Spot gold <XAU=> was bid at $1,362.70 an ounce at 1333 GMT,
against $1,363.59 late in New York on Tuesday. U.S. gold futures
for April delivery <GCJ1> eased 50 cents to $1,363.60 an ounce.
A change in previously lacklustre sentiment towards the
precious metal on Tuesday as it held its ground after China's
rate hike prompted a scramble among speculative investors to
cover short positions, lifting prices more than 1 percent.
A run of well-received economic data in January had taken
the wind out of gold's sails and increased speculation a
correction was due, pushing prices back towards $1,300 an ounce.
"A lot of speculative (investors) that had gone in at the
end of last year clearly saw growth being reignited and they got
scared," said London & Capital portfolio manager Pau Morilla
Giner. "They thought that gold would lose its appeal."
"But the long-term money in gold is still there," he said.
"The realisation is that economic news has been better than
expected because the stimulus that has been applied has been
extraordinary."
On the wider markets, the euro gave up its gains against the
dollar after sources said Bundesbank head Axel Weber will not be
a candidate to replace Jean-Claude Trichet as President of the
European Central Bank. European shares edged lower. [] []
U.S. oil prices rose after four consecutive sessions of
losses, while Brent crude rose more than half a percent to above
$100 a barrel due to tighter North Sea supplies. Base metals
prices eased. [] []
MARKETS AWAIT BERNANKE
Financial markets' attention will be focused on Federal
Reserve Chairman Ben Bernanke's testimony to the House Budget
Committee at 1500 GMT, where traders will look for clues as to
the outlook for monetary policy.
"The messaging from Fed speakers so far this week has held
close to market expectations," said UBS in a note. "Today Fed
Chairman Bernanke testifies to Congress, and if he retains his
dovish undertones of last week this may assist gold."
Holdings of the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust <GLD>, dipped to 1,228.56 tonnes on
Tuesday from 1,228.864 tonnes the previous day, although the
hefty outflows seen in January have apparently been staunched.
[]
The SPDR fund saw its second-biggest monthly outflow and the
main silver ETF, the iShares Silver Trust <SLV>, its biggest
ever outflow last month, adding downward momentum to precious
metal prices.
Silver <XAG=> was bid at $30.30 an ounce against $30.31,
after reaching its highest price since Jan. 4 on Tuesday at
$30.35 an ounce.
The gold:silver ratio -- the number of silver ounces needed
to buy an ounce of gold -- recovered from the near five-year low
below 45 it reached on Tuesday to just above that level.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on the gold:silver ratio: http://link.reuters.com/pas87r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Platinum and palladium rose back to multi-year highs on
Wednesday at $1,865 and $836.75 an ounce respectively, boosted
by firmer gold prices, a softer dollar, and expectations that
demand from carmakers for the autocatalyst metals will improve.
Analysts also suspect platinum output from South Africa,
which produces four-fifths of world supply of the metal, and
palladium exports from Russia could be constrained this year.
"Supply side fundamentals and the economic recovery support
a slightly brighter future outlook," said VTB Capital in a note.
Platinum <XPT=> was later at $1,858 an ounce against
$1,855.24, while palladium <XPD=> was at $832.97 versus $835.72.
(Editing by Keiron Henderson)
