* Gold recovers after biggest one-day fall since Nov. 12
* Caution hits financial markets ahead of U.S. growth data
* Coming up: U.S. advance Q4 GDP data at 1330 GMT
(Updates throughout, previous SINGAPORE)
By Jan Harvey
LONDON, Jan 28 (Reuters) - Gold edged higher as caution
dogged the financial markets ahead of U.S. growth data due
later, having earlier hit a near four-month low as a better
economic outlook dented safe-haven buying of the metal.
Spot gold <XAU=> was bid at $ an ounce at GMT against
$1,312.24 late in New York on Thursday. U.S. gold futures for
February delivery <GCG1> fell $ an ounce to $.
The metal had touched a low of $1,308.00 an ounce, having
fallen 2.6 percent on Thursday after a run of firmer than
expected U.S. economic data boosted confidence in the recovery.
Traders will now be closely eyeing a U.S. fourth-quarter
growth report due at 1330 GMT. The data is expected to show the
U.S. economy gathered speed in the last quarter. []
"One of the dangers in the gold price this year is that if
confidence rises, and U.S. growth and the economic recovery
continues, gold's allure as a hedge against risk is somewhat
diluted," said VM Group analyst Carl Firman.
"At the moment you probably find that money is going into
riskier assets, perhaps with higher returns."
European stocks retreated as traders took to the sidelines
ahead of the data after a softer session in Asia, and the dollar
was little changed versus the euro. [] []
The single currency remains supported, however, by the
European Central Bank's hawkish tone on interest rates, analysts
said, with markets pricing in more than one 25 basis point hike
by year-end.
With the Fed showing few signs of tightening monetary
policy, this may lead to further dollar weakness versus the euro
this year, which typically would support gold. However, the
usual inverse link between the two has eased in the last year.
Physical gold buying in Asia lent some support to prices on
Friday as the previous session's dip attracted some buyers back
to the market, though Chinese buying is expected to ease after
the Lunar New Year next week.
ETF INVESTMENT EASES
Investment demand for gold has been soft this year, with
holdings of the SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, down another 3 tonnes on Thursday.
London's ETF Securities reported a 1.3-tonne outflow from
its gold exchange-traded products on the same day.
The Wall Street Journal reported on Friday that hedge fund
SHK Asset Management liquidated a U.S. gold futures position
this week valued at over $850 million, more than 10 percent of
the main U.S. futures market. []
While the outlook for ETF and futures investment is
uncertain, physical demand for gold, particularly from Asia, is
expected to be a major factor underpinning prices this year.
"The China Gold Association estimates... that the demand for
gold in the first half of the year will rise by 15 percent year
on year, citing growing demand for alternative investments and
protection against inflation," said Commerzbank in a note.
"Already last year, China's gold demand posted double-digit
growth, according to the World Gold Council," it said.
Spot silver <XAG=> was bid at $ an ounce against $26.88.
Holdings of the world's largest silver-backed ETF, the iShares
Silver Trust <SLV>, fell to 10,426.43 tonnes on Thursday from
10,447.70 tonnes.
"Silver ETF holdings fell by 122 tonnes on the week (and)
are down 550 tonnes from their peak," said RBS Global Banking &
Markets in a weekly report. "ETF holdings represent 66 percent
of 2010 world mine output."
Platinum <XPT=> was at $ an ounce against $1,781 and
palladium <XPD=> was at $ against $802.22.
(Reporting by Jan Harvey; Editing by William Hardy)
