* Growing optimism over growth, stability hurt gold
* Silver tracks gold prices down to two-month lows
* Gold: silver ratio reaches lowest since end Nov
(Updates prices)
By Jan Harvey
LONDON, Jan 21 (Reuters) - Gold touched a two-month low in
Europe on Friday, pressured by a firmer appetite for assets seen
as higher risk on expectations the economic recovery was gaining
traction, but a retreat in the dollar prevented a steeper drop.
The metal is heading for a third consecutive weekly loss and
its weakest monthly performance since July as a more optimistic
view of global economic growth and stability boosted investment
in assets seen as higher risk, like stocks, at gold's expense.
Spot gold <XAU=> fell as low as $1,340.80 an ounce and was
bid at $1,343.80 an ounce at 1217 GMT, against $1,345.40 late in
New York on Thursday. U.S. gold futures for February delivery
<GCG1> fell $3.20 an ounce to $1,343.30.
Analysts say outflows from products like physically backed
exchange-traded funds suggest investor appetite for gold is
slackening after a run of firmer than expected U.S. economic
data and as concern over euro zone sovereign debt levels recede.
"We are still staying on track and above the longer-term
upward trend, but definitely at the moment the reasons to buy
gold -- the fear of a deepening of the European crisis, a weaker
dollar, fear over the economic crisis worldwide, inflation --
are not there," said Commerzbank analyst Eugen Weinberg.
"Gold indeed used to be a fear indicator and as this fear
appears to be leaving the market, the gold price is under
pressure," he added.
However, gold still looks set to climb in 2011, he said,
with persistently low interest rates likely to lend support. The
precious metal tends to underperform in the early months of even
positive years, Weinberg added.
Gold's slide was limited on Friday by a retreat in the
dollar to two-month lows versus the euro <EUR=>, with the single
currency reaching its highest level since late November, helped
by improving confidence in the euro zone. []
European shares also rose, while world stocks edged up.
Equities and commodities were battered on Thursday by concerns
that rising inflation in emerging economies could lead to
tighter monetary policy, harming global growth. []
INDIAN BUYING RESUMES
Some fresh demand emerged in India, the world's biggest
consumer of the precious metal, as prices hit their lowest since
late November, according to dealers in Mumbai. []
"I may have booked for 200 kgs of gold from yesterday at
$1,346-1,349," said one. "Buyers all want to take maximum
advantage of falling prices."
Other commodities recovered after the previous session's
losses, with oil prices rising back towards $90 a barrel and
copper firming. [] []
Bucking the trend, silver prices extended losses to a fresh
seven-week low at $27.10 an ounce, pressured by a further
outflow from the world's largest silver-backed exchange-traded
fund, the iShares Silver Trust <SLV>.
Holdings of the trust fell by just over 10 tonnes on
Thursday after recording their biggest one-day drop since late
November in the previous session. It has seen outflows of more
than 346 tonnes so far this year. []
Investment demand was a major driver in silver's more than
80 percent price gains last year.
"Industrial demand for the metal remains at risk from
substitution, given recent price gains," said Barclays Capital
in a report. "Investor interest is critical for silver given its
poor supply and demand dynamics."
The gold: silver ratio -- the number of ounces of silver
needed to buy an ounce of gold -- rose back towards 50 on
Friday, its highest since late November, showing gold is
becoming increasingly expensive compared to silver.
Silver <XAG=> was bid at $27.21 an ounce against $27.48.
Elsewhere, platinum <XPT=> was at $1,811.24 an ounce against
$1,808.50, while palladium <XPD=> was at $810.22 versus $808.47.
(Editing by James Jukwey)
