* Euro gives up early gains vs dollar on German data
* Oil prices rise towards $69/oz
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By Jan Harvey
LONDON, June 9 (Reuters) - Gold retreated from highs in
Europe on Tuesday as the dollar recovered initial losses against
the euro, denting the precious metal's appeal as an alternative
asset to the U.S. currency.
Spot gold <XAU=> was bid at $950.35 an ounce at 1110 GMT,
against $950.05 an ounce late in New York on Monday. Earlier it
rose as high as $954.95.
The euro retreated against the dollar on Tuesday after a
bigger-than-expected fall in German industrial output suggested
the euro zone's biggest economy is still facing weak global
demand for its goods. []
"The dollar is strong against the euro and that seems to be
related to the really poor German industrial numbers," said
Citigroup analyst David Thurtell.
"In terms of direction, the dollar is very, very important
to gold, and it is difficult to see that changing."
Gold has recently re-established its close inverse
relationship with the dollar, after the two assets briefly
mirrored one another's moves early in the year as both reacted
to risk aversion.
The metal is likely to spend some time consolidating above
$950 an ounce after sliding 3 percent in the last two sessions,
but underlying interest in gold as a hedge against currency
weakness and prospective inflation remains firm, analysts said.
A clearing out of weak long positions -- speculative
positions on New York's COMEX exchange -- from the gold market
has given it a stronger base for gains, Gerry Schubert, head of
precious metals at INTL Commodities, said.
"The most important point is that we have seen some long
liquidation that we needed to see," he said. "The whole picture
looks a lot healthier than it looked five, six days ago."
On other markets, oil prices rose on Tuesday towards $69 a
barrel. Firmer crude prices often help gold, which can be bought
as a hedge against oil-led inflation. []
BUOYANT
Buoyant commodity prices helped lift European shares in
early trade, after stock markets declined in Asia as investors
worried a three-day equity rally was overdone.
Gold moved the opposite way to equities early this year as
they acted as a barometer for risk appetite, but the link has
weakened. []
Physical demand remained relatively quiet, with the market
dominated by investment buying. In India, the world's largest
bullion market, high prices kept traders on the sidelines as the
wedding season approached its end.
Among other precious metals, platinum eased a touch from
late Monday but lifted from early lows as the dollar wilted.
Mitsubishi precious metals strategist Tom Kendall said with
no underlying fundamental reason for autocatalyst material
platinum to make fresh gains, it is likely to reflect dollar
moves.
"I would expect prices to stall around here and then drift
lower," he said. "But if the dollar is going to sell off again
then in dollar terms, prices will naturally move higher."
ETF Securities said holdings of its ETFS Physical Platinum
exchange-traded fund <PHPT.L> rose nearly 16,000 ounces or 5.1
percent on Monday, suggesting firm investor interest in the
metal. []
Platinum <XPT=> was quoted at $1,238.50 an ounce against
$1,242 late in New York on Monday, while palladium <XPD=> was at
$249.50 against $247.50. Silver <XAG=> was at $14.94 an ounce
against $14.91, tracking moves in gold.
(Additional reporting by Kylie Maclellan; Editing by Peter
Blackburn)
