* ECB warns euro zone banks may see second wave of losses
* Euro slides 1.5 pct to four-year low versus dollar
* Chinese, European manufacturing growth slows in May
(Updates, adds comment, changes dateline from SYDNEY)
By Jan Harvey
LONDON, June 1 (Reuters) - Gold firmed in Europe on Tuesday
as investors bought the metal as a haven from risk after the
European Central Bank warned that euro zone banks could face a
fresh wave of losses.
The metal is also benefiting from concerns over the strength
of the global economic recovery after data showed Chinese and
European manufacturing growth slowed in May.
Spot gold <XAU=> was bid at $1,221.95 an ounce at 0919 GMT,
against $1,214.20 late in New York on Monday. U.S. gold futures
for June delivery <GCM0> on the COMEX division of the New York
Mercantile Exchange rose $9.50 to $1,221.70 an ounce.
"The main driver for gold is going to be what is going to
happen with regards to Europe and all its debt issues," said
Standard Bank analyst Walter de Wet.
The ECB warned on Monday that euro zone banks face up to 195
billion euros in a "second wave" of potential loan losses over
the next 18 months due to the financial crisis, and said it had
raised purchases of euro zone government bonds. []
The euro <EUR=> tumbled 1.5 percent in response to a
four-year low against the dollar. Gold typically moves in the
opposite direction to the U.S. currency, but both have benefited
from safe-haven buying this year. []
De Wet added that manufacturing data was also being closely
watched for clues on the broader economic recovery, and for its
impact on stocks. He said any revival in equity markets
currently tended to augur a dip in gold.
"We have seen China('s data) already coming in slightly
lower than expected, and if these things come out bearish I
think gold will find support," he said.
Data showed manufacturing growth in China and South Korea
slowed in May as the pace of new orders eased amid growing
uncertainty about the impact of Europe's debt crisis on Asia's
export-dependent economies. []
A later report showed manufacturing growth in the euro zone
slowed in May from the previous month as cost pressures and
tighter margins drove firms slow output. []
INVESTMENT HOLDS
Investment demand for gold held steady, with holdings of the
world's largest gold exchange-traded fund, New York's SPDR Gold
Trust <GLD>, still at a record 1,267.93 on Monday. []
"Financial investments in gold as seen through the
popularity of ETFs reached a new peak (in May) with total known
holdings in gold ETFs rising by 8.3 percent or 5 million ounces
to 63.8 million ounces," said Saxo Bank senior manager Ole
Hansen in a note.
"Technically gold looks firm above $1,200 after the risk
reduction sell-off earlier in the month attracted additional
buyers," he added.
Some analysts also pinpointed geopolitical tensions as a
supportive factor for gold, after Israeli marines stormed a
Turkish aid ship bound for Gaza on Monday. []
Prices of other commodities slipped, however, as buyers
worried that soft manufacturing data from China and Europe
suggest demand for raw materials is set to decline.
U.S. crude futures dropped 2.7 percent to below $72 a
barrel, while industrial metals slipped sharply, with copper
down 3.5 percent, nickel 3.8 percent and zinc 4.3 percent in
early trade. [] []
Prices of industrial precious metals also slipped, led by
palladium, which shed nearly 3 percent.
Silver <XAG=> was bid at $18.31 an ounce against $18.49.
Platinum <XPT=> was at $1,538 an ounce against $1,558.50, while
palladium <XPD=> was at $452 against $465.10.
(Reporting by Jan Harvey; Editing by William Hardy)
