* Equities slip, dollar climbs on European banking jitters
* Steady demand expected from India over festival period
* Palladium seen outpacing gains in platinum
(Updates throughout, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, Sept 7 (Reuters) - Gold held near $1,250 an ounce in
Europe on Tuesday, supported by reemerging concerns over the
European banking sector and worries about global economic
growth, though strength in the dollar capped gains.
The precious metal is often bought as a haven from
uncertainty in other markets.
Spot gold <XAU=> was bid at $1,249.05 an ounce at 0851 GMT,
against $1,249.55 late in New York on Monday. U.S. gold futures
for December delivery <GCZ0> fell 30 cents to $1,250.80.
Equities slipped, German government bonds rose and the
dollar climbed after a Wall Street Journal report said Europe's
recent "stress tests" of major banks underestimated some
lenders' holdings of potentially risky government debt.
[]
"This morning we've seen risk aversion coming back with the
Wall Street journal report," said Credit Agricole analyst Robin
Bhar. "That has obviously impacted on equities, we've seen
safe-haven flows into the dollar, but not into gold."
"If gold is getting those flows, it is really swimming
against the tide, as the dollar is rising, capping gains."
A stronger dollar curbs gold's appeal as an alternative
asset and makes dollar-priced commodities more expensive for
holders of other currencies, weighing on prices.
The euro fell 0.9 percent against the dollar <EUR=>, on
fresh worries about the euro zone banking system after the WSJ
report. The dollar index <.DXY>, which tracks the unit's
performance against a basket of others, rose 0.6 percent. []
Meanwhile, German government bonds rose, recovering some
ground after three sessions of steep losses last week. []
On the wider markets, European shares slipped amid concerns
over the health of the banking sector, while world stocks
retreated from the previous session's one-month high. []
HEALTHIER TONE
A healthier tone to equity markets after U.S. economic data
broadly pleased investors last week eroded some of gold's appeal
as an alternative asset, analysts said. The largest gold
exchange-traded fund, the SPDR Gold Trust, reported outflows at
the end of last week. []
"High prices and already inflated investment demand limited
investor interest in the yellow metal, while many started
looking for returns elsewhere on high hopes for a continued
economic recovery," said VTB Capital analyst Andrey Kryuchenkov
in a note.
Among other commodities, oil prices fell more than $1 a
barrel and base metals like copper, zinc and lead all declined
as gains in the dollar make them more expensive for non-U.S.
investors. [] []
Demand for gold was steady in Asia, however, as the festival
season gets underway in India. Gold is widely gifted in
religious celebrations and weddings in the country, which
accounts for 20 percent of global demand for jewellery. []
Among other precious metals, platinum <XPT=> was at
$1,551.50 an ounce against $1,555.90, while palladium <XPD=> was
at $521.50 against $523.83.
Both have benefited from expectations for a recovery in
autocatalyst demand -- the biggest segment of consumption --
though gains palladium have outstripped those of platinum.
"We expect demand for palladium in auto catalytic converters
to outpace platinum demand in a recovery as vehicle growth
favors palladium-intensive regions -- the U.S. and emerging
markets over Europe," said Morgan Stanley in a note.
Spot silver <XAG=> was bid at $19.70 an ounce against
$19.90, having matched Friday's 2-1/2 year high at $19.92 an
ounce earlier this week.
(Reporting by Jan Harvey; Editing by Alison Birrane)
