* Dollar firms as risk aversion cranks up
* Equities slide on fears flu pandemic could hit economy
(Updates prices)
By Jan Harvey and Rebekah Curtis
LONDON, April 27 (Reuters) - Gold edged lower on Monday as
the dollar strengthened, but losses were capped as fears of a
flu pandemic knocked equities and helped underpin gold's appeal
as a hedge against risk.
Spot gold <XAU=> was bid at $908.2 an ounce at 1426 GMT,
against $911.10 an ounce late in New York on Friday. Earlier it
touched a high of $918.25.
World stocks tumbled on Monday after seven weeks of gains,
while oil and the euro fell, as markets fretted over the
potential economic impact of the spreading swine flu that has
killed more than 100 people in Mexico. []
Saxo Bank senior manager Ole Hansen said traders would
watch how the wider markets reacted to the prospect of a flu
outbreak.
"If there is some worry that this will prolong the slump, or
will increase the difficulties of the economy returning to some
kind of shape...that might have an impact on gold," he said.
The precious metal has been underpinned by technical factors
after breaking above $900 an ounce last week, and has been
lifted by news China has sharply increased its gold reserves.
But gold has failed to break upwards through a level of
resistance, seen by analysts of past price movements at $918.50
an ounce.
The precious metal climbed 2.5 percent to Monday's high from
the middle of last week, boosted by news China had increased its
gold holdings by three-quarters since 2003, and later amid fears
the swine flu outbreak could knock the economy.
On the foreign exchange markets, the dollar and yen
strengthened broadly on rising risk aversion. A stronger dollar
typically weighs on gold, which is often bought as an
alternative asset to the currency. []
Gold broke through $900 late last week and was boosted on
Friday by news that China has lifted its gold reserves by three
quarters to 1,054 tonnes, against 600 tonnes at the time of its
last report in 2003.
"The possibility that China might increase its official
sector gold holdings further is potentially supportive of
prices," HSBC said in a research note.
GOLD BUYING
Dubai's gold imports in the first quarter of the year grew
15 percent from a year earlier, according to the Dubai World
Group. However, gold sales there fell 40-60 percent in the first
quarter compared with the final quarter of 2008. []
Gold buying in the world's biggest gold consumer, India,
rose ahead of the wedding season there but remains sharply down
year-on-year as high prices and the economic slowdown dents
consumers' interest in jewellery. []
Demand for gold-backed exchange-traded funds also remained
stagnant. The largest gold ETF, the SPDR Gold Trust, said its
holdings were unchanged on Friday from a day before. []
Among other precious metals, spot platinum <XPT=> was bid at
$1,147.50 an ounce against $1,173.50, while spot palladium
<XPD=> was bid at $225.50 an ounce against $231.
Rhodium <RHOD-LON> has fallen $175 since Thursday to trade
at $1,350. Platinum group metals, which are mainly used in
industry, have suffered from concerns about the outlook for the
global economy.
Silver <XAG=> was bid at $12.97 an ounce against $12.84. The
metal rose 3 percent to a near four-week high of $13.20 earlier,
but is vulnerable to a correction in gold, analysts said.
(Reporting by Jan Harvey; Editing by Sue Thomas)
