* 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 prices, adds comment)
By Jan Harvey
LONDON, June 1 (Reuters) - Gold rose above $1,220 an ounce
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.
It also benefited 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 $1,220.05 an ounce at 1100 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 $7.90 to $1,220.10 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. []
U.S. manufacturing data from its Institute of Supply
Managers is due at 1400 GMT.
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. []
"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... buyers."
Gold continued to benefit from jitters linked to the heavy
indebtedness of some peripheral euro zone economies, and the
prospect of such issues spreading further afield.
Sean Corrigan, chief investment strategist at Diapason
Commodities Management, said he saw gold and to a lesser extent
silver as "insurance policies" against risk in the wider market.
Reuters' technical analysis suggests gold is likely to find
resistance near $1,229 an ounce. If it breaks this, it could
re-challenge its May 14 record of $1,248.95 an ounce. []
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Prices of other commodities slipped, however, as buyers
worried that soft manufacturing data from China and Europe
suggest demand for raw materials may decline. [] []
Silver <XAG=> was bid at $18.30 an ounce against $18.49.
Platinum <XPT=> was at $1,539.65 an ounce against $1,558.50,
while palladium <XPD=> was at $451.08 against $465.10.
(Reporting by Jan Harvey; Editing by William Hardy)
