* Obama's softer tone on banks lifts risk appetite
* Dollar retreats from 6-month high versus euro
* Lonmin, Aquarius report lower output
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, Jan 28 (Reuters) - Gold gave up some of its early
gains on Thursday as the euro retreated from highs versus the
dollar amid concerns over the heavy indebtedness of smaller euro
zone economies like Greece and Portugal.
The precious metal had risen as high as $1,093.00 an ounce
in earlier trade as the dollar retreated after U.S. President
Barack Obama softened his tone on bank restrictions in his State
of the Union speech, lifting appetite for risk. []
Spot gold <XAU=> was bid at $1,089.95 an ounce at 1230 GMT,
against $1,087.25 late in New York on Wednesday.
"Currencies are clearly guiding the immediate direction of
the precious metals, especially after fresh trouble brewing in
Portugal, Italy, Greece, (and) Spain now, which threatens to
undermine the health of the common currency," said Pradeep Unni,
senior analyst at Richcomm Global Services.
The dollar slipped from a six-month high versus the euro in
early trade after Obama laid out plans to revive the U.S.
economy and allayed market worries about moves to limit bank
risk-taking in his comments. []
But it bounced back in the early afternoon as investors
worried about Greece's debt, and analysts warned the euro was
heading for more losses as concerns rise about the grim fiscal
conditions in the euro zone.
Gold prices have declined some 4 percent in the last two
weeks as the dollar rallied against the euro <EUR=>, with fears
over Greece's fiscal situation and waning risk appetite lifting
the U.S. unit at the expense of higher-yielding currencies.
"The precious metals have been struggling with dollar
strength so far," said Saxo Bank senior manager Ole Hansen.
He said the Obama speech and expectations Federal Reserve
Chairman Ben Bernanke will be reappointed had helped dispel some
risk aversion. "These things have removed some uncertainty, and
that has helped the market to stabilise," he said.
APPETITE RECOVERS
Among other commodities, oil rose towards $74 a barrel
<CLc1> after Obama's speech and the Fed's decision to maintain
low interest rates revived some confidence over economic growth.
[]
Gold tends to track crude prices, as the metal can be bought
as a hedge against oil-led inflation.
In production news, the China Gold Association said Chinese
gold output jumped 11.34 percent to a record 313.98 tonnes in
2009, securing the country's position as the world's largest
producer of the yellow metal. []
Silver <XAG=> rose to $16.64 an ounce versus $16.54.
Holdings of the world's largest silver exchange-traded fund, the
iShares Silver Trust <SLV>, rose 0.5 percent to 9,384.98 tonnes
on Jan. 27, it said. []
Platinum <XPT=> was at $1,510 an ounce against $1,502.50,
while palladium <XPD=> was at $417 against $411.50.
Lonmin Plc <LMI.L>, the world's number three platinum
producer, said platinum sales fell 13.6 percent in its first
quarter as refined output of the metal declined. []
Fifth-largest miner Aquarius Platinum <AQP.AX> also said its
attributable output fell 14.8 percent year-on-year.
[]
Traders said while the figures were likely to underpin fears
that production will be weak this year, their impact on prices
would be limited. "Mining problems are already in the price, as
everybody is expecting them," said one PGMs trader.
A Reuters poll published on Wednesday showed platinum and
palladium are expected to outperform other precious metals this
year, with a new wave of investor demand boosting prices in
anticipation of increased industrial use. []
(Reporting by Jan Harvey; Editing by Amanda Cooper and Sue
Thomas)
