* Equities slide, dollar climbs on European bank fears
* Steady demand expected from India during festival
* Silver soars to 2-year high early, falls on risk fears
(Updates with New York prices, comment; changes byline, dateline;
reledes, rewrites throughout.)
By Carole Vaporean and Jan Harvey
NEW YORK/LONDON, Sept 7 (Reuters) - Gold ended with healthy
gains on Tuesday after rising early to its highest level since
late June, as renewed concerns about the European banking system
sent investors seeking safe-haven assets.
Gold bullion <XAU=> was up to $1,256.90 an ounce by 3:31 p.m.
EDT (1931 GMT) from $1,249.55 an ounce in late Monday trade.
Earlier, it hit a high of $1,259.80.
COMEX December gold futures <GCZ0> firmed $8.20 to close at
$1,259.30 an ounce, a 0.66 percent gain, having climbed to
$1,261.60, a peak last seen on June 28.
Gold denominated in euros <XAUEUR=R> hit a greater than
two-month peak at 990.98 euros an ounce, while strength in the
yellow metal lifted silver <XAG=> to 2-1/2 year highs at $20.04 an
ounce.
"I think it was a pretty one-dimensional day. I didn't see any
catalyst other than the European-led bank concerns driving gold
up," said James Steel, metals analyst at HSBC in New York.
Prices moved up as investors sought gold in a safety play
after concerns resurfaced about the health of some European bank
debt.
Gold advanced, world stocks retreated and the euro weakened
after the Wall Street Journal reported that recent European
banking sector stress tests underestimated some lenders' holdings
of potentially risky government debt.
While gold rose, the euro fell as investors' risk appetite
dissipated amid new concerns over European banks. The U.S. dollar
rose against most major currencies on the renewed bank concerns.
[]
"Risk-off again, with European banks potentially needing to
raise additional capital, seems to have dampened the excitement
after Friday's U.S. data," said Ole Hansen, senior manager at Saxo
Bank.
Better-than-expected U.S. payrolls data lifted risk appetite
and pressured gold on Friday.
"Gold investors' loyalty towards the yellow metal looks to be
rewarded as it slowly grinds its way back towards the record
highs," said Hansen, adding that another round of profit taking
could take place before significant new highs are reached.
But many analysts agree that gold's trend is still pointing
north.
Despite gold's higher levels, trading volumes remained
moderate as many U.S. players opted to take time off, extending
the Labor Day holiday that shut all U.S. markets on Monday.
With a light economic calendar and the Jewish holiday later in
the week, trade could stay thin all week.
Steel noted that quiet trading periods tend to benefit gold,
but there were no guarantees.
OIL FALLS
Among other commodities, oil prices fell more than 2 percent
and base metals like copper, zinc and lead all declined as gains
in the dollar made them more expensive for non-U.S. investors.
[] []
Moreover, risk averse investors fled industrial metals in
favor of gold with greater perceived safety.
Demand for gold was steady in Asia, as the festival season
gets under way in India. Gold is widely offered there as gifts in
religious celebrations and weddings, accounting for 20 percent of
global jewelry demand. []
Among other precious metals, platinum <XPT=> was lower at
$1,551.50 an ounce against $1,555.30, while palladium <XPD=> was
down at $519.50 against $523.83.
Both metals have benefited from expectations of a recovery in
autocatalyst demand -- the biggest segment of consumption -- but
were sold on Tuesday in the risk aversion play along with other
industrial metals.
Spot silver slipped to $19.80 after its earlier 2-1/2 year
high.
"On a fundamental basis, we still expect the silver market to
be in surplus this year, thus investor appetite will remain
pivotal for prices to retain their upward momentum," said
Barclays Capital in a note.
Prices at 2:41 p.m. EDT (1841 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1259.30 8.20 0.7% 14.9%
US silver <SIZ0> 19.883 -0.032 0.0% 18.0%
US platinum <PLV0> 1556.30 -4.80 -0.3% 5.8%
US palladium <PAZ0> 521.60 -7.45 -1.4% 27.6%
Gold <XAU=> 1257.45 7.90 0.6% 14.7%
Silver <XAG=> 19.90 0.00 0.0% 18.2%
Platinum <XPT=> 1556.00 0.70 0.0% 6.2%
Palladium <XPD=> 521.50 -2.33 -0.4% 28.6%
Gold Fix <XAUFIX=> 1256.75 9.50 0.8% 13.8%
Silver Fix <XAGFIX=> 19.65 -21.00 -1.1% 15.7%
Platinum Fix <XPTFIX=> 1556.00 4.00 0.3% 6.1%
Palladium Fix <XPDFIX=> 529.00 5.00 1.0% 31.6%
(Reporting by Carole Vaporean; editing by Jim Marshall)
