* S&P sees sovereign ratings downgrades outpacing upgrades
* SPDR Gold ETF holdings steady at 1,028.98 tonnes
(Recasts, adds comment, updates prices)
By Jan Harvey
LONDON, Feb 25 (Reuters) - Gold recovered losses on
Wednesday as stock markets retreated, with risk aversion again
rising after comments from Standard & Poor's that it expects to
see more sovereign ratings downgrades than upgrades this year.
Fears about the economic outlook for eastern Europe were
further fuelled by the agency downgrading its rating on Ukraine,
dealers said.
Spot gold <XAU=> edged up to $963.50/965.50 an ounce at 1416
GMT from $962.45 in New York late on Tuesday. Earlier it touched
a session low of $950.50 an ounce.
Quantitative Commodity Research consultant Peter Fertig said
positive comments from Federal Reserve head Ben Bernanke on
Tuesday coupled with gold's failure to definitively move above
$1,000 an ounce had weighed on prices earlier in the session.
But as stock markets in Europe fell, gold started to
strengthen, he said.
"We have this recovery of equity markets and the S&P story
on the economic situation again giving gold a push to the
upside," Fertig said.
The head of sovereign ratings at Standard & Poor's said he
expected sovereign ratings downgrades to outpace upgrades this
year as global economies battled a deepening recession.
[]
The yen rallied after the news, while world stocks
retreated. U.S. stocks are tipped to open lower, as investors
worry the sharp run-up in the market on Tuesday would be
unsustainable. []
The dollar firmed against the euro as investors remained
averse to risk. []
Gold typically trends in the opposite direction to the U.S.
currency, and is often bought as an alternative asset.
However, the two have moved in line in recent weeks as both
have benefited from a flight to safety among investors. Gold
benefits when risk aversion is high as it is seen as a safe
store of value for investors.
Traders will be eyeing January existing home sales data due
out in the United States at 1500 GMT for clues on the health of
the economy, and further testimony from Bernanke later in the
session before the House Financial Services Committee.
CAPPED
However, gold's gains may be capped by fears the precious
metal's rally to 11-month highs above $1,000 an ounce last week
was overdone.
Holdings of the world's largest gold exchange-traded fund,
the SPDR Gold Trust <GLD>, was 1,028.98 tonnes for a fourth
consecutive session on Tuesday, fuelling fears burgeoning demand
for gold to back ETFs may have stalled.
"There is no demand for gold other than investment demand
into ETFs and into small bars and coins," Commerzbank analyst
Eugen Weinberg said.
Gold buying in India has picked up, however, as prices have
retreated from the record highs they hit last week. A further
dip below 15,000 rupees per 10 grams may rekindle buying
interest, dealers said. []
"We are getting calls for the first time after gold dipped
below $1,000," a dealer with a state-run bank in Mumbai said.
India's buying of the precious metal tailed off as gold
soared, leading some to speculate a depression in jewellery
demand could prove a major drag on prices, despite the strength
of investment buying.
On the supply side, analysts say the recent rise in the gold
price is likely only to slow the decline in mine production.
Figures released on Tuesday showed output in South Africa fell
13.6 percent in 2008 to its lowest in 86 years.
Among other precious metals, spot silver <XAG=> firmed to
$13.85/13.91 an ounce from $13.74. Holdings of the largest
silver-backed ETF, the iShares Silver Trust <SLV>, were also
static on Tuesday, albeit at record levels.
Platinum <XPT=> was steady at $1,038.50/1,048.50 an ounce
from $1,040.50, while palladium <XPD=> was at $196.50/201.50 an
ounce from $198.
(Additional reporting by James Macharia; Editing by Sue
Thomas)
