* Dollar hits 5-week high versus the euro on Greece concerns
* Indian buying picks up as gold prices fall
* SPDR gold ETF holdings steady but down in 2010 so far
(Updates, adds comment, changes dateline from TOKYO)
By Jan Harvey
LONDON, Jan 21 (Reuters) - Gold prices fell towards $1,100
an ounce in Europe on Thursday as the dollar's rise to a
five-month high versus the euro curbed buying of the precious
metal as an alternative asset.
Spot gold <XAU=> was bid at $1,103.65 an ounce at 1031 GMT,
against $1,111.10 late in New York on Wednesday. U.S. gold
futures for February delivery <GCG0> on the COMEX division of
the New York Mercantile Exchange fell $8.60 to $1,104.00.
The dollar hit a five-month high versus the euro <EUR=> on
Thursday as investors spooked by concerns over Greece's rising
debt sold the single currency. []
Tobias Merath, head of commodities research at Credit
Suisse, said while the strong dollar was negative, falling bond
yields in the United States, which made gold a more attractive
alternative asset, were supporting the metal.
"Bond yields in U.S. have been coming down, and this is a
positive factor for gold because gold is a non-yielding asset,"
he said.
"We have had two diverging factors at work -- the dollar
strengthening, but yields falling because of the risk
aversion/bond rally."
The euro extended losses after a reading of the euro zone
purchasing managers' index missed consensus. []
Strength in the dollar versus the euro curbs gold's appeal
as an alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies.
"Bullion should continue trading against the U.S. currency,
tracking the broader market," VTB Capital said in a note. "We
see our key support holding at $1,090 in case we lose more
ground."
CHINA GROWS
On the wider markets, oil prices were steady, supported by
strong Chinese growth data. Asian stocks fell as investors
worried China would take more measures to temper growth after
its fastest quarterly growth in two years, and European shares
were flat. [] []
In India, historically the world's largest consumer of gold,
traders continued to buy as prices hit new two-week lows.
"Yesterday's sales were highest in the month," said a dealer
with a state-run bank. []
Meanwhile holdings of the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust <GLD>, were
steady on Wednesday, but are down 21.7 tonnes or 1.9 percent
this year. In the same period of 2009, they rose 22.7 tonnes.
Holdings of the main silver ETF, the iShares Silver Trust
<SLV>, have also fallen 154 tonnes in 2010 to date.
Traders say some investors with an interest in precious
metals ETFs are pulling money out of the SPDR and the iShares
fund in favour of new U.S. platinum- and palladium-backed ETFs.
Spot platinum <XPT=> was at $1,601 an ounce versus
$1,622.50, while palladium <XPD=> was at $458 versus $465. Lease
rates for the two metals have risen steadily since the launch of
the ETFs operated by a U.S. unit of London's ETF Securities.
Silver <XAG=> was at $17.67 an ounce against $17.87,
following gold lower.
"Since silver tends to disproportionally track the movements
of gold, and since we expect the gold price to correct in the
spring, silver is likely to weaken temporarily as well,"
Commerzbank said in a note. "Prices could fall to as low as
$15.00 an ounce."
(Editing by Sue Thomas)
