PRECIOUS-Gold dips on profit taking as other assets recover

                                
 * European shares gain for third consecutive session
                                
* Euro up against dollar, yen as risk aversion ebbs
* SPDR Gold Trust ETF, iShares silver ETF at record
(Updates prices, adds comment)
                                
 By Jan Harvey
                                
 LONDON, Jan 28 (Reuters) - Gold slipped on Wednesday as
investors cashed in profits after the precious metal hit a
three-month high earlier this week, with a recovery in stock
markets indicating the beginnings of a revival in risk appetite.
                                
 Spot gold <XAU=> was quoted at $892.10/894.10 an ounce at
1510 GMT, down from $897.35 late on Tuesday. U.S. gold futures
for February delivery <GCG9> on the COMEX division of the New
York Mercantile Exchange dipped $6.80 to $892.70 an ounce.
                                
 Gold has been well supported by investors' fears over
systemic risk and the outlook for the economy, which sent the
metal to a three-month high on Monday. But signs are emerging
that this risk aversion is ebbing, prompting some profit taking.
                                
 "Technically, the daily charts are overbought and warrant
profit taking after a relentless rally over the fag-end of last
week," said Pradeep Unni, senior analyst at Richcomm Global
Services.
                                
 Moves in the dollar versus the euro, which usually push gold
in the opposite direction, are currently being trumped by the
perception of risk.
                                
 The euro rose against the dollar on Wednesday as risk
aversion cooled, pressuring gold, while investors awaited the
end of a meeting of Federal Reserve rate setters. [ID:nLS216604]
                                
 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 leading the market higher. [ID:nLS69003]
                                
 U.S. stock futures also rose on optimism the new Obama
administration will move quickly to stabilise the ailing banking
sector. [ID:nN28505189]
                                
 "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."
                                
 Oil prices, typically another key external driver of gold,
were steady at just below $42 a barrel. [ID:nSIN310458]
                                
 Fears over the outlook for the economy and growing systemic
risk are currently playing a greater role in the direction of
gold than its usual drivers, oil and currencies, 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
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. [ID:nBOM357298]
                                
 "Jewellers are not comfortable buying at such high prices,"
said Harshad Ajmera, proprietor of Kolkata bullion dealer JJ
Gold House.
                                
 Among other precious metals, silver prices were little
changed at $12.02/12.08 an ounce from $12.01.
                                
 The iShares Silver Trust <SLV.A>, the world's biggest
silver-backed ETF, said its bullion holdings rose more than 110
tonnes on Tuesday to a record 7,453.15 tonnes, and are up more
than 300 tonnes in the first two days of the week.
[ID:nLS638754]
                                
 "What we tend to see between gold and silver prices is that
initially people will opt for gold as a safe-haven asset, but if
gold prices rally too far, the cheaper option is to buy silver
instead," said Barclays Capital analyst Suki Cooper.
                                
 Platinum and palladium firmed a touch. Spot platinum <XPT=>
was at $950/958 an ounce against $945, while spot palladium was
at $189/194 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. [PREC/POLL]
 (Editing by Anthony Barker)