* Bullion prices consolidate after Wednesday's hefty losses
* Longer-term support seen from euro zone debt issues
* Platinum, palladium slide to lowest since early March
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, May 20 (Reuters) - Gold steadied in Europe on
Thursday after the previous day's 2.5 percent slide, finding
support from expectations euro zone debt problems will
resurface, and from longer-term concerns over inflation.
Industrial precious metals continued to decline, however,
with autocatalyst metals platinum and palladium extending the
previous session's losses to their lowest since early March,
after a sharp rise earlier this year.
Spot gold <XAU=> was bid at $1,189.10 an ounce at 0932 GMT,
against $1,190.75 late in New York on Wednesday.
The precious metal was sold heavily in that session as
widespread volatility in the financial markets prompted
investors to liquidate gold holdings to cover losses elsewhere.
It continued to struggle early on Thursday as traders lost
faith in the metal's rally. In the longer term, however,
analysts say the metal is poised for further gains.
"When we have had these sell-offs in gold because of market
disruption, which we had in October 2008 when it fell by $100 in
one day, it has after that found a new level and started to rise
again," said VM Group analyst Matthew Turner.
The euro <EUR=> remained vulnerable in volatile trading
conditions on Thursday as uncertainty over unity in the euro
zone weighed on the single currency. []
While gold traditionally moved in line with the euro, that
link has broken down this year as investors turned to bullion to
protect against heavy losses in the single currency.
Other assets such as oil, base metals and European shares,
have rebounded on Thursday after the previous session's
sell-off, which was sparked by Germany's decision to ban short
selling on some financial assets. [] [] []
ETF HOLDINGS HIT RECORD
Investment demand for gold was firm, with holdings of the
world's largest gold-backed exchange-traded fund, New York's
SPDR Gold Trust <GLD>, rising to a record 1,220.152 tonnes on
Wednesday. []
Strong inflows into U.S. and European ETFs, plus a recovery
in sales of gold coins and bars, helped spark a price rise to a
record $1,248.50 an ounce last week. The current correction
notwithstanding, analysts are optimistic its uptrend will
resume.
"It has proven to be resilient, and not a market to stand in
front of whilst it's motoring," said Peter Hillyard, head of
metals sales at ANZ Bank in London.
"Even though gold comes off from time to time, its recovery
is usually harder, stronger and more credible, so the market has
learned to stay long or buy dips."
Technical analysts, who study charts of past price moves to
determine the future direction of prices, say gold could retrace
a little further before any recovery. Strong support is seen at
$1,184, and below that in the $1,169-$1,171 area.
Platinum and palladium slid to their lowest since early
March due to perceptions the metals' sharp rise earlier this
year was overdone. Palladium in particular has met with fund
selling, analysts said.
Platinum <XPT=> hit a low of $1,555.25 and was later at
$1,561 an ounce against $1,600, while palladium <XPD=> was at
$440 against $457, having slipped as low as $432.08.
"The question now is, will investors cut their ETF exposure
or view the dip as a buying opportunity given the improving
fundamental outlook for both metals?" said James Moore, an
analyst at TheBullionDesk.com.
Silver <XAG=> was bid at $18.05 an ounce against $18.13.
(Reporting by Jan Harvey; Editing by Sue Thomas)
