* Dollar index <.DXY> eases as recovery fizzles out
* Indian demand wanes after festival season
* Rhodium prices reach highest in a year at $1,800/oz
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Oct 21 (Reuters) - Gold prices softened but held well
above $1,050 an ounce in Europe on Wednesday, awaiting direction
from the foreign exchange markets, as the previous day's
recovery in the dollar index <.DXY> petered out.
With physical demand for the metal from jewellers and
investors in exchange-traded funds still lacklustre, gold is at
the mercy of the currency markets, traders said.
Spot gold <XAU=> was bid at $1,053.15 an ounce at 0933 GMT
against $1,054.00 late in New York on Tuesday. U.S. gold futures
for December delivery <GCZ9> on the COMEX division of the New
York Mercantile Exchange eased $4.40 to $1,054.20 an ounce.
Prices have been tracking the euro-dollar exchange rate,
with gold hitting record highs of $1,070.40 last week as the
dollar struck its lowest in more than a year versus the single
currency.
"Gold does not seem to have a mind of its own," said Afshin
Nabavi, head of trading at MKS Finance in Geneva. "It all
depends on the euro."
"My guess today would be that $1,050 may remain as a good
support with $1,068-1,070 as resistance," he said. "A break
above $1,075 should open the path for $1,100."
Despite the gains in gold prices over the last month,
relatively little scrap is coming back onto the market, compared
with the record levels seen earlier this year when gold rose
above $1,000 an ounce, he said.
The dollar softened against the euro <EUR=> on Wednesday and
the dollar index edged lower as a brief recovery from 14-month
lows versus the single currency fizzled out. []
Traders are closely watching the progress of equity markets,
with any recovery expected to boost risk appetite and lift the
appeal of higher-yielding currencies.
European shares edged lower in choppy trade on Wednesday,
having initially firmed. []
OIL SOFTENS
Oil prices meanwhile softened, falling below $79 a barrel
after hefty gains earlier in the week took it to one-year highs.
Strength in crude prices tends to benefit gold, which can be
bought as a hedge against oil-led inflation. []
Physical demand for gold remained slow as high prices put
off buyers. In India, the world's biggest gold consumer last
year, buyers stuck to the sidelines as demand linked to last
week's festival period petered out.
"Demand is very dull as Diwali/Dhanteras is over," said an
official from a state-run bullion-dealing bank. []
Among other precious metals, spot silver <XAG=> was at
$17.41 an ounce against $17.45.
Platinum prices firmed and palladium held steady, helped
both by recent gains in gold linked to dollar weakness and hopes
demand for the metals used in catalytic converters will improve.
Top Japanese and Korean carmakers have seen improved
quarterly earnings as government incentive schemes boost car
sales, but currency swings remain a risk, they said.
[]
Platinum <XPT=> was at $1,350.50 an ounce against $1,347,
while palladium <XPD=> was flat at $334.
ETF Securities saw an inflow of nearly 5,100 ounces into its
ETFS Physical Platinum exchange-traded commodity on Tuesday,
lifting its total holdings 1.4 percent, it said.
"Dips remain supported by both speculative and investment
sources, with both (platinum and palladium) potentially looking
to make further gains," said TheBullionDesk.com analyst James
Moore.
Fellow autocatalyst material rhodium <RHOD-LON> rose $50 an
ounce to $1,800 an ounce, its highest level in a year.
(Reporting by Jan Harvey; Editing by Anthony Barker)
