* Bullion falls further after recent record high
* Longer-term support seen from euro zone debt issues
* Palladium skids nearly 11 pct, platinum more than 5 pct
(Updates prices)
By Jan Harvey and Rebekah Curtis
LONDON, May 20 (Reuters) - Gold hit a two-week low in Europe
on Thursday, extending the previous session's 2.5 percent fall,
as analysts said its recent rally was overdone, but ongoing
concern about Europe's debt problems capped the price slide.
Palladium skidded nearly 11 percent to $407.98 an ounce, its
lowest level since Feb.15 and on track for its biggest daily
percentage fall since late 2008, as analysts said a sharp rise
in industrial precious metals earlier this year had been
overdone. Platinum fell more than 5 percent.
Spot gold <XAU=> was bid at $1,180.35 an ounce at 1213 GMT,
against $1,190.75 late in New York on Wednesday. It fell more
than 1 percent to a day's low of $1,177.95, its lowest since
May. 6, falling from record highs above $1,200 last week.
Bullion dropped on Wednesday, as Germany's decision to ban
short selling on some financial assets unnerved financial
markets and prompted investors to liquidate gold holdings to
cover losses elsewhere.
"When gold hit highs last week we were looking for some
correction," said Walter de Wet, an analyst at Standard Bank.
"I wouldn't be surprised if it tested $1,170."
But he, and other analysts, said gold looked well supported
looking ahead.
"Problems in the euro area should continue to provide some
support. These debt problems are not going to go away
overnight," he said. "Gold will continued to have this increased
safe haven status."
The euro <EUR=> fell 1 percent in volatile trading due to
uncertainty over unity in the euro zone. []
While gold has traditionally moved in line with the euro,
that correlation has slackened this year as investors turn to
bullion to protect against heavy losses in the single currency.
Oil fell some 2 percent to below $69 a barrel, hit by
concerns about demand in the euro zone, while European shares
were sharply lower. [] []
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 believe 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 <XPT=> traded at $1,512 an ounce against $1,600,
its lowest since Feb.25, while palladium <XPD=> was at $413.70
against $457. Palladium in particular incurred fund selling,
analysts said.
"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 $17.74 an ounce against $18.13.
(Editing by Amanda Cooper)
