* European shares gain for third consecutive session
* Euro up against dollar, yen as risk aversion ebbs
* SPDR Gold Trust ETF holds at record, up 7 pct vs Jan 1
(Updates throughout, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, Jan 28 (Reuters) - Gold slipped more than 1 percent
in Europe on Wednesday, extending the last session's decline, as
a firmer tone to equities and the euro showed the risk aversion
that pushed bullion to a three-month high was ebbing.
Spot gold <XAU=> was quoted at $889.90/891.90 an ounce at
1047 GMT, down from $897.35 late on Tuesday. Earlier it fell to
a low of $882.40 after pushing through technical resistance just
above $890.
"In the last days the gold price was moving higher despite
the stronger dollar," Eugen Weinberg, an analyst at Commerzbank,
said. "The risk aversion of the market participants was playing
a huge role."
"Right now, the European equity markets -- another indicator
of risk aversion -- are friendlier and are showing some
recovery. In this case, you are not looking for a safe haven."
The direction of the dollar, which usually pushes gold in
the opposite direction, is having little effect on the market at
present, as it is trumped by the perception of risk.
The euro gained against the dollar on Wednesday as risk
aversion continued to ebb, pressuring gold, while investors
awaited the conclusion of a meeting of Federal Reserve rate
setters later in the session.
While headline interest rates are unlikely to change from
their current level of zero to 0.25 percent, investors will be
looking for further news on U.S. quantitative easing and details
of a proposed "bad bank" to take over toxic banking assets.
European shares also ticked up for the third consecutive
day, with banks and energy stocks leading the market higher
after a firm session in New York on Tuesday. []
Oil prices, typically another key external driver of gold,
were relatively steady at just over $42 a barrel. On Tuesday
they plunged 9 percent on demand fears, adding to downward
pressure to bullion. []
"With U.S. Dept of Energy inventory statistics due later
today, oil prices could fall further if the data shows another
inventory rise after last week's aggressive 6.1 million barrel
increase," Standard Bank analyst Manqoba Madinane said.
Fears over the outlook for the economy and growing systemic
risk are playing a greater role in the direction of gold than
its more usual drivers at present, analysts said.
SPDR SOARS
The 7 percent rise in the SPDR Gold Trust's <GLD> bullion
holdings this year is widely attributed to safe haven buying.
The trust, an exchange-traded fund which issues securities
backed by physical stocks of bullion, has seen interest soar as
risk-averse investors seek out physical gold.
However, jewellery demand remains depressed as prices hold
near $900 an ounce, particularly in key global centres such as
India, China and the Middle East. []
"Jewellers are not comfortable buying at such high prices,"
said Harshad Ajmera, proprietor of Kolkata bullion dealer JJ
Gold House.
The German finance ministry said it had no plans to sell
gold, after comments from government budget spokesman Steffan
Kampeter on Tuesday that the Bundesbank could sell bullion
reserves to finance the government's stimulus measures.
[]
"Gold is considered the ultimate stable currency right now
and I don't think any central bank is interested...in selling
its gold holdings," Weinberg said.
Among other precious metals, silver prices were little
changed at $12.04/12.11 an ounce from $12.01.
Platinum and palladium were also steady, having lost well
over half their value from the highs of early last year on fears
over falling demand from carmakers.
Spot platinum <XPT=> was at $942/950 an ounce against $945,
while spot palladium was at $187/192 from $188.50.
A Reuters precious metals survey of 56 analysts showed most
believe platinum prices will remain depressed this year as an
expected small supply dip fails to balance falling demand from
major consumers carmakers. []
(Editing by Sue Thomas)
