* Dollar recovers from 5-month low vs basket of currencies
* North Korea launches second nuclear test, denting stocks
(Updates prices)
By Jan Harvey
LONDON, May 26 (Reuters) - Gold slipped 1.5 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.
Prices took little support from fresh geopolitical tensions,
after North Korea launched a second nuclear test.
Spot gold <XAU=> was bid at $945.35 an ounce at 1122 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 euro slipped versus the U.S. currency on Tuesday after a
media report questioning the health of the German banking system
prompted traders to trim bets against the dollar. []
Data also showed industrial new orders in the euro zone fell
0.8 percent in March from February, against expectations for 0.8
percent monthly growth.
Meanwhile Germany 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.
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,"
Calyon said in a note.
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 $14.36 an
ounce against $14.71, tracking gold.
Platinum <XPT=> was quoted at $1,132.50 an ounce against
$1,149.50 late on Monday, while palladium <XPD=> was at $229
against $231.50.
Both platinum and palladium, 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 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 Anthony Barker)
