* SPDR gold ETF sees biggest 1-day outflow since April 2008
* Euro, equities climb, reflecting sharper risk appetite
* Palladium rises more than 4 pct to highest since late June
(Updates prices)
By Jan Harvey
LONDON, July 29 (Reuters) - Gold firmed on Thursday as
price-sensitive physical buying kept the metal off the last
session's three-month lows, but a revival in appetite for assets
seen as higher risk took the heat out of safe-haven demand.
Investment remains lacklustre as risk appetite sharpens,
analysts said, with the world's largest gold-backed exchange
traded fund reporting a hefty outflow on Wednesday.
Spot gold <XAU=> was bid at $1,164.10 an ounce at 1514 GMT,
against $1,162.55 late in New York on Wednesday, recovering from
a three-month low of $1,156.90 reached that day. U.S. gold
futures for August delivery <GCQ0> rose $2.40 to $1,162.80.
Prices have struggled to maintain higher levels since
hitting a record $1,264.90 an ounce in June, with investors
liquidating their gold holdings in favour of other assets as
equities recovered some of the losses made earlier this year.
"Gold does very well in a market disruption/risk
environment, which is what we obviously saw in May and June to
some extent," said Michael Lewis, head of commodities research
at Deutsche Bank. "Those concerns have come off the boil a bit."
On the physical side of the market, traders reported good
buying for a fourth day in major gold consumer India, as they
stock up ahead of festivals in the subcontinent. []
But investment demand for physical bullion in Europe has
softened as concerns over the stability of the financial system
recede. This is set to keep prices under pressure.
"Physical investment in the continental European market is
very, very quiet," said Wolfgang Wrzesniok-Rossbach, head of
sales at Heraeus. "It is not a mass market at the moment."
He said the company had the highest turnover in gold ever in
May, but that sales volumes had dropped off significantly in
July. "There was clearly a Greece effect this year that led from
February onwards until May."
The world's largest gold ETF, the SPDR Gold Trust <GLD.P>,
said its holdings fell by 18.55 tonnes on Wednesday, their
biggest one-day drop since April 2008. []
EURO, EQUITIES CLIMB
UBS analyst Edel Tully said while gold had arrested its
slide, the physical interest that had emerged to lend support to
the market may not be enough to drive prices higher.
"It is clear that the frenzied appetite to liquidate that
prevailed earlier in the week has significantly dampened," said
UBS analyst Edel Tully in a note. "This suggests that a great
bulk of the weak longs are now extinguished.
"But this does not mean that gold will move significantly
higher from here. Rather, with the selling mania under sedation,
the actions in the physical market have greater importance in
terms of helping to provide a price floor," he added.
On the wider markets, the dollar weakened against the euro
<EUR=> to its lowest since early May. Sharper appetite for risk
is lifting the appeal of higher-yielding currencies. []
Weakness in the U.S. unit usually benefits gold, as it
boosts its appeal as an alternative investment and makes
dollar-priced assets cheaper for holders of other currencies.
Among other commodities, oil prices rose more than $1 a
barrel, boosted by a strong opening on Wall Street. []
Silver <XAG=> was at $17.58 an ounce against $17.44, and
platinum <XPT=> was at $1,553.50 an ounce versus $1,531.75.
Palladium <XPD=> meanwhile rose to its highest since late
June at $487.25 an ounce and was later at $485.23 versus
$465.93, helped by the weaker dollar and options-related buying.
(Editing by William Hardy)
