* Dollar lifts from five-month low vs basket of currencies
* North Korea launches second nuclear test, denting stocks
(Updates throughout, changes dateline - pvs TOKYO)
By Jan Harvey
LONDON, May 26 (Reuters) - Gold eased in Europe on Tuesday
as the dollar recovered from the lows it hit late last week
versus a basket of currencies, curbing interest in the metal as
an alternative asset.
But prices could recover if the currency weakens further as
trading restarts in the UK and United States after Monday's
holiday, helped by exchange-traded fund buying last week and a
dip in stock markets after surprise North Korean nuclear tests.
Spot gold <XAU=> was bid at $950.70 an ounce at 0827 GMT,
against $957.80 an ounce late on Monday.
"The euro is a touch easier. Also, the market is shrugging
off North Korean testing of short range missiles," said Afshin
Nabavi, head of trading at MKS Finance in Geneva. "We need a
break of $965 to rally."
The dollar rose on Tuesday from the five-month lows it hit
late last week as investors booking profits on higher-yielding
currencies such as the euro. []
The dollar index <.DXY>, which measures the U.S. unit's
performance against six other currencies, firmed 0.6 percent. A
stronger dollar makes gold more expensive for holders of other
currencies.
Traders are looking ahead to a spate of U.S. economic data
due out later in the session, which could impact the dollar. May
consumer confidence numbers are due at 1400 GMT, when Richmond
Fed May manufacturing and services indexes will also appear.
"As with other U.S. data, an improvement is expected, but
even if our forecast proves correct, with a slight improvement
likely, confidence will still languish around historical lows,"
said Calyon in a note.
The Chicago Fed April national activity index will be
relased at 1230 GMT.
DOLLAR EYED
Gold exchange-traded fund holdings have firmed a touch,
meanwhile, after a period of stability.
On Friday holdings of the world's largest, the SPDR Gold
Trust <GLD>, climbed to a 1,118.76 tonnes from the day before,
while holdings of gold ETFs operated by Zurich Cantonal Bank and
Julius Baer <BAER.VX> also rose last week. []
"We will be monitoring the inflows into the gold ETF with
particular care in the next few days," said UBS analyst John
Reade in a note.
"The gold market has changed again: driven now by dollar
weakness and fears of inflation, the metal will probably take
its direction from the strength (or lack thereof) of the U.S.
dollar."
Among other precious metals, silver <XAG=> was at $14.53 an
ounce against $14.71, tracking gold.
Platinum <XPT=> was quoted at $1,136 an ounce against
$1,149.50 late on Monday, while palladium <XPD=> was at $232
against $231.50.
Both metals, which are chiefly used as components in
autocatalysts, are struggling to post gains against a background
of turmoil in the car industry.
In the United States, United Auto Workers' union officials
will gather on Tuesday to hear how many U.S. factory jobs
General Motors <GM.N> will cut as the embattled carmaker enters
what could be its last week outside bankruptcy. []
GM has until June 1 to work out its issues with creditors if
it is to avoid a bankruptcy filing.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
