* China hikes bank reserve requirements by 50 basis points
* Euro rises after firm Spanish, Portuguese bond sales
* Gold:silver ratio rises to highest since mid-December
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Jan 14 (Reuters) - Gold fell in Europe on Friday
after China's central bank raised lenders' reserve requirements
by 50 basis points, with softer haven demand for the metal after
solid bond sales by Portugal and Spain also weighing on prices.
But physical demand for gold in Asia is still likely to
underpin the precious metal, analysts said, with Chinese buyers
moving into the market ahead of the Lunar New Year in February.
Spot gold <XAU=> was bid at $1,368.45 an ounce at 1047 GMT,
against $1,372.75 late in New York on Thursday, having earlier
hit a low of $1,365.33. U.S. gold futures for February delivery
<GCG1> fell $18.80 an ounce to $1,368.20.
China's central bank raised lenders' required reserves for
the fourth time in just over two months on Friday, making good
on its vow that inflation fighting will be a top priority for
the year. []
Gold is sometimes seen as a hedge against rising inflation,
and also benefits widely from a low interest rate environment.
"China's move of course has consequences for the gold
market, but it is not (just) China that is playing a role," said
Peter Fertig, a consultant at Quantitative Commodity Research.
"After yesterday's ECB conference the market is also concerned
that the ECB might hike rates earlier than previously assumed."
The European Central Bank said on Thursday that the euro
zone faces short-term price pressures which may linger, showing
it could raise interest rates to contain inflation even while
the bloc is gripped by a debt crisis. []
"Also bond auctions for Portugal, Spain and Italy went well,
credit default swaps are declining, and spreads over German
bunds are falling, which indicates there is less reason to be
concerned about the euro zone debt crisis," Fertig added.
"Investors are moving again out of safe havens into more
risky assets, which also weighs on gold," he said.
The euro <EUR=> earlier hit a one-month high against the
dollar and the Swiss franc after tough talk on inflation from
the European Central Bank and an easing of debt worries after
solid bond sales by Portugal and Spain. []
The European currency shed gains after China's announcement,
but quickly crept higher once again. Nonetheless, gold prices
have struggled to mirror its strong performance.
"Gold's inability to follow the euro/dollar higher can be
attributed to this week's successful auctions in the euro zone
periphery, and the associated dampening of sovereign debt
concerns," said UBS analyst Edel Tully in a note.
DEBT CONCERNS
Worries over certain euro zone countries' debt levels can
work two ways for gold, lifting prices as investors choose gold
as a haven from risk, but weighing on them via the pressure they
exert on the euro.
Traders in Asia reported strong physical gold buying,
particularly from China, on Friday, but large bullion-backed
exchange-traded funds continued to see outflows.
Holdings of the world's largest gold ETF, New York's SPDR
Gold Trust <GLD>, fell by more than 6 tonnes on Thursdaym and
are down more than 15 tonnes so far this year. []
Among other precious metals, spot silver <XAG=> was bid at
$28.60 an ounce against $28.67.
The gold:silver ratio -- the number of ounces of silver
needed to buy an ounce of gold -- rose to a one-month high on
Friday at just below 48, showing that silver, as is typical, is
underperforming gold in a falling market.
Platinum <XPT=> was at $1,807.74 an ounce against $1,799.99,
while palladium <XPD=> was at $797 against $803.75.
(Reporting by Jan Harvey; editing by Keiron Henderson)
