* Dollar turns lower versus currency basket
* Physical demand still sluggish
(Updates prices, adds comment)
By Jan Harvey
LONDON, July 7 (Reuters) - Gold rose in Europe on Tuesday as
the dollar turned lower against a basket of currencies, with the
euro rising to a day high versus the U.S. currency after
stronger-than-expected German manufacturing data.
Traders are awaiting fresh direction from the foreign
exchange markets after a meeting of G8 leaders later this week.
Spot gold <XAU=> was bid at $930.95 an ounce at 1138 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 precious metal climbed on Tuesday as the dollar <.DXY>
gave up early gains against a basket of currencies, with the
euro reversing earlier losses to firm against the U.S. currency.
[]
"The euro been given a bit of a lift against the dollar by
comments about the possible need for a second U.S. stimulus
package and by better-than-expected German factory orders," said
Tom Kendall, precious metals strategist at Mitsubishi Corp.
"But (there is) very little upside momentum for the euro or
gold," he added.
A weaker dollar boosts interest in gold as a currency hedge
and makes the metal cheaper for holders of other currencies.
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 on Wednesday, which could impact on the foreign
exchange markets and consequently on gold.
"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," said Simon Weeks, director of precious metals at the
Bank of Nova Scotia.
WEAKER
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.
Investment demand remained relatively soft, with holdings of
the largest gold-backed exchange-traded fund, the SPDR Gold
Trust <GLD>, falling 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 $13.31 an
ounce against $13.24, tracking the uptick in gold. Platinum
<XPT=> was at $1,147.50 an ounce against $1,143, while palladium
<XPD=> was at $242.50 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.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
