* Dollar recovers from 5-month low vs basket of currencies
* North Korea launches second nuclear test, denting stocks
(Releads, updates prices)
By Jan Harvey
LONDON, May 26 (Reuters) - Gold slipped 1.7 percent in
Europe on Tuesday as the dollar bounced back against the euro
after last week's losses, curbing interest in the metal as an
alternative asset.
Spot gold <XAU=> was bid at $942.20 an ounce at 0942 GMT,
against $957.80 an ounce late on Monday.
Afshin Nabavi, head of trading at MKS Finance in Geneva,
said the dollar's recovery was pressuring gold. "Also, the
market is shrugging off North Korean testing of short range
missiles," he added.
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 euro slipped after industrial new orders in the euro
zone fell 0.8 percent in March from February, against
expectations for 0.8 percent monthly growth. []
Germany also said a record slump in exports and investment
had sparked its biggest contraction since reunification in the
first quarter. GDP shrank 6.7 percent year-on-year in the first
three months of 2009.
A media report questioning the health of the German banking
system also prompted traders to trim bets against the dollar.
Gold prices took little support from fresh geopolitical
tensions, after North Korea launched a second nuclear test.
The dollar index <.DXY>, which measures the U.S. unit's
performance against six other currencies, firmed 0.8 percent.
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 $14.41 an
ounce against $14.71, tracking gold. Platinum <XPT=> was quoted
at $1,130 an ounce against $1,149.50 late on Monday, while
palladium <XPD=> was at $230 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)
