PRECIOUS-Physical, ETF demand sustain gold

                                
 * Premiums for gold bars in Tokyo rise
                                
 * Gold supported by inflation worries
                                
 * Coming up: U.S. Feb industrial output at 1315 GMT
                                
 
                                
 (Updates after U.S. data)
                                
 By Pratima Desai
                                
 LONDON, March 17 (Reuters) - Gold rose on Thursday,
sustained by an increase in ETF holdings, stronger physical
demand and a weaker dollar, but investor selling to cover losses
in other markets limited gains.
                                
 Platinum and palladium fell as the market fretted about a
loss of demand due to car plant closures in Japan after the
earthquake. Platinum and palladium tumbled to 3-1/2 month lows
of $1,654 and $684.50 an ounce respectively.
                                
 U.S. gold futures for April <GCJ1> was up $2.9 an ounce to
$1,399.0 an ounce. Spot gold <XAU=> was bid at $1,400.47 a troy
ounce at 1243 GMT from $1,398.70 late in New York on Wednesday.
Earlier this week gold fell to a one-month low of $1,380.90.
                                
 "With gold dropping below $1,400 we continue to see good
demand in the physical market. At levels above $1,430 we see
scrap coming to the market," said Walter de Wet, analyst at
Standard Bank. "There's been consistent liquidation ... since
last week, following the earthquake."
                                
 Stock markets around the world showed signs of recovery, but
many investors were nursing large losses because of the sell-off
triggered by the earthquake and tsunami which hit Japan last
week. [ID:nTOPNOW4] [nTOPJP] [.EU] [.N]
                                
 These losses in some cases have to be covered by selling
assets such as gold which have performed well in recent months.
                                
 The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings edged up to 1,217.295 tonnes
by March 16 from 1,212.745 tonnes by March 15, their lowest
since May of last year. [GOL/SPDR]
                                
 Premiums for gold bars rose to as much as $2 an ounce in
Tokyo, double from earlier this week, as a record-high yen
boosted demand and supply tightened. [ID:nL3E7EH0AL]
                                
 
                                
 SHORTAGES OF PARTS AND WORKERS
                                
 The dollar <.DXY> fell broadly against major currencies and
was near a record low against the yen <JPY=>, which was boosted
by expectations of currency repatriation to help Japan's
reconstruction effort. [USD/]
                                
 It pared some losses against the euro after data showed U.S.
consumer prices rose at their fastest pace in more than 1-1/2
years in February. [ID:nN16149631]
                                
 A lower dollar makes commodities priced in dollars cheaper
for holders of other currencies, while gold is also used as a
hedge against inflation pressures often sparked by rising crude
oil prices. [O/R]
                                
 "Concerns remain that rising commodity prices could feed
into higher inflation, particularly in Europe (where) headline
inflation is already a concern," ANZ said in a note. "Gold is
expected to benefit in a higher inflation environment."
                                
 Spot silver <XAG=> was at $34.41 an ounce from $34.20 late
on Wednesday. Platinum <XPT=> was at $1,686.49 an ounce from
$1,686.50 and palladium <XPD=> at $705.72 from $694.50.
                                
 Part of the reason for the recovery was news on Wednesday
that car marker Nissan Motor <7201.T> said it would restart
operations at a plant in Japan. [ID:nLDE72F18U]
                                
 Japan's nuclear crisis has hit demand for platinum group
metals (PGM), with some of the world's top auto makers forced to
halt production of vehicles that use the metals for
autocatalysts. [ID:nN16414605]
                                
 Many other plants are still shut and may remain so for some
time. Japanese auto makers, led by Toyota Motor Co <7203.T>, are
struggling to restart production amid a shortage of parts and
workers. [ID:nL3E7EG0J4]
                                
 "The PGMs have been significantly affected by the economic
dislocation in Japan and disruption to Japanese auto output,"
HSBC said in a note.
                                
 "Despite the disruption in Japanese production and the drop
in PGM demand by the auto makers in that nation, the underlying
supply/demand fundamentals for platinum and palladium remain
tight. Prices are likely to trade higher in the near term."
                                
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 Price graphic             http://link.reuters.com/pys58r
                                
 Japan earthquake and commodities:
                                
                           http://link.reuters.com/kuw58r
                                
 Japan disaster in figures    http://r.reuters.com/ser58r
                                
 Graphics by topic            http://r.reuters.com/fyh58r
                                
 Picture, graphic packages    http://r.reuters.com/wyb58r
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 (Editing by James Jukwey)