* Stocks take firmer tone, yen dips as risk appetite revives
* European, Asian markets thinned by May Day holidays
(Updates prices, adds comment)
By Jan Harvey
LONDON, May 1 (Reuters) - Gold edged lower in Europe on
Friday as a recovery in risk appetite, reflected in the firmer
tone to stock markets, dented the metal's safe haven appeal,
with traders awaiting U.S. data due later for direction.
Trading is thin due to May Day holidays across Europe and
Asia, traders said.
Spot gold <XAU=> was bid at $882.70 an ounce at 1142 GMT,
against $885.50 an ounce late in New York on Thursday.
"Another good day for Asian equity markets kept gold under
pressure this morning in pretty thin trade, with support around
$880 tested," said Tom Kendall, precious metals strategist at
Mitsubishi Corp.
"So far that level has held but gold seems likely to face
further selling once US markets open," he added. "If we break
lower, then the metal could rapidly head towards $855."
The MSCI world index and European stocks were little changed
on Friday, but the equity markets' good performance in Asia,
where Japanese equities hit a four-month high, reflected hopes
the global economic downturn is bottoming out. []
U.S. stock futures also pointed to a higher opening on Wall
Street. []
"As stock markets extend their gains, funds are likely to
get further diverted away from bullion into equities," said
Pradeep Unni, senior analyst at Richcomm Global Services.
"Technically, charts look quite weak and selling momentum
(should) gather pace as gold pierces through the $880 -$878
support," he said. Bargain hunting might limit the slide below
$864, he added.
Also illustrating renewed confidence in the economy, the yen
slipped to two-week lows versus the dollar and the euro. The
Japanese currency is typically a prime beneficiary of risk
aversion. []
DIRECTION
With trade expected to remain quiet early in the session
with much of Europe enjoying the May Day holiday, traders are
awaiting direction from U.S. economic data due later.
April ISM manufacturing data and March factory orders are
due at 1400 GMT, and a key consumer sentiment reading will be
released at 1355 GMT. April vehicle sales data due later may
also have an impact on platinum and palladium.
The metals have suffered from falling demand from carmakers,
who account for over half of global consumption. More bad news
emerged on Thursday as Chrysler sought Chapter 11 bankruptcy
protection. []
"Yesterday's announcement from the White House that Chrysler
will seek bankruptcy protection brings the auto sector closer to
an endgame," said Swiss bank UBS in a note.
"We suspect that concerns over this... is one of the reasons
why the platinum price has underperformed gold over the past two
weeks," it added.
UBS lifted its short-term platinum price forecasts to $1,175
an ounce on a one-month basis from $1,100, and to $1,275 an
ounce over three months from $1,150. It cited strong Chinese
demand as the reason for the rise.
The bank now sees palladium at $220 an ounce in one month,
up from $200 previously, and at $230 in three months, against
$210.
Elsewhere ETF Securities, which operates Europe's largest
platinum-backed exchange-traded fund, said its Physical Platinum
fund <PHPT.L> saw an outflow of 16,600 ounces on Thursday,
equivalent to 5 percent of its total holdings. []
Platinum <XPT=> was bid at $1,088.50 an ounce against
$1,098, while palladium <XPD=> was bid at $210.50 an ounce
against $215. Spot silver <XAG=> was at $12.20 an ounce against
$12.34.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
