* Dollar treads water as oil, equities take breather
* Palladium holds below 10-1/2 mth high after car sales data
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Aug 4 (Reuters) - Gold held below $955 an ounce in
Europe on Tuesday, off the previous day's seven-week high, as
traders awaited direction from currency markets, with easing oil
and equity prices and weak physical demand restraining a rise.
Platinum and palladium also retreated from the highs they
hit on Monday after better-than-expected U.S. car sales data
boosted hopes demand for the autocatalyst materials may revive.
Spot gold <XAU=> was bid at $953.70 an ounce at 0926 GMT,
against $955.55 an ounce late in New York on Monday. In that
session, the metal hit a seven-week high of $962.10.
"The weaker dollar, no doubt about it, has been the main
driver (of gold)," said Saxo Bank senior manager Ole Hansen.
"The interesting bit is how the dollar will do from here."
He said further gold price gains were likely to face tough
resistance. "The way the stock markets are performing, there are
other, and better, opportunities to be had in other asset
classes," he said.
A weaker dollar boosts investors' interest in hard assets
such as bullion, and makes gold cheaper for holders of other
currencies. The U.S. dollar was little changed against a basket
of currencies on Tuesday after the last session's fall. []
Currency traders are awaiting direction from the wider
markets, particularly equities, which have softened a touch as
traders take profits after recent strong gains.
Asian stocks rallied to an 11-month high on Tuesday before
pulling back, while European equities edged lower after the
previous session's nine-month peak. [] []
Oil also fell below $71 a barrel, paring three days of
gains, as expectations of a rise in U.S. crude inventories
offset optimism from strong U.S. and Chinese manufacturing data.
[]
HEAVY PRESSURE
Given weak underlying demand for gold, prices are likely to
experience heavy pressure above $960 an ounce, analysts said.
Inflows into gold-backed exchange-traded funds were weak
last month, with holdings of the largest, New York's SPDR Gold
Trust <GLD>, easing 4 percent. []
Gold buying in India, the world's largest bullion market
last year, began to pick up as traders prepared to meet festival
demand, but demand was muted by higher prices. India's festival
season starts on Wednesday with Rakshabandhan. []
Among other precious metals, silver <XAG=> was at $14.12 an
ounce against $14.21. Platinum and palladium eased a touch,
giving up gains that took platinum to its strongest in seven
weeks and palladium to a near eleven-month high on Monday.
The metals rallied in New York trade as palladium especially
was lifted by news that U.S. auto sales jumped to a 2009 high in
July, as Americans took advantage of a $1 billion incentive
scheme to scrap their old cars. []
The United States is primarily a market for gasoline cars,
which use a higher proportion of palladium than platinum in
their catalytic converters.
UBS analyst John Reade said in a note while the metals
benefited from rising U.S. car sales, "the boost from the cash
for clunkers programme distorted the stronger sales numbers".
"Still, this is evidence of pent-up demand for new cars in
the U.S. and we suspect once the cash for clunkers programme is
finally completed, car sales will start to improve," he said.
Platinum <XPT=> was at $1,228 an ounce against $1,232.50,
while palladium <XPD=> was at $268.50 against $269.50.
(Additional reporting by Catherine Bosley; Editing by Sue
Thomas)
