* Euro slides after Fed, Greece's second downgrade in a week
* Gold tracks oil, other commodities lower
* ETFS Physical Palladium ETP holdings hit record
(Updates prices)
By Jan Harvey
LONDON, Dec 17 (Reuters) - Gold prices fell 3 percent in
Europe on Thursday, pressured by the dollar's rise to 3-1/2
month highs against the euro as new concerns emerged over
Greece's fiscal health.
A statement by the Federal Reserve, in which it voiced
growing optimism on the U.S. economy after it left interest
rates unchanged on Wednesday, also supported the dollar.
Spot gold <XAU=> was bid at $1,104.10 an ounce at 1654 GMT,
against $1,137.80 late in New York on Wednesday. Earlier it
touched a low of $1,102.90.
"We had the downgrading of Greece, and that is putting a bit
of tension back into the euro," said Ole Hansen, senior manager
at Saxo Bank.
"It seems like we are seeing a change in the perspective for
the dollar heading into the New Year, and that is going to be a
very interesting one to follow."
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange fell $30.40 to
$1,105.90 an ounce.
The dollar hit three-month highs against a currency basket
and rose against the euro as concerns over fiscal troubles in
peripheral euro zone countries gathered pace, with Greece seeing
the second downgrade of its credit rating in a week. []
The U.S. currency had already risen sharply against a basket
of currencies after the Fed highlighted improvement in the U.S.
economy on Wednesday.
"As the markets get further confirmation that the U.S.
economy is gathering strength, the dollar's strength may force
gold to slide lower," Pradeep Unni, a senior analyst at Richcomm
Global Services, said.
The Fed voiced growing optimism on Wednesday over the U.S.
economy as job losses slow, but said it would keep interest
rates low for "an extended period". []
In a post-meeting statement, the Fed highlighted improvement
in the battered housing sector and noted last month's fall in
the unemployment rate.
UPWARD TRAJECTORY
"The overall tone was more than sufficient for the greenback
to extend its upward trajectory, especially amid the rapid
concentration of euro zone-centric credit and banking problems,"
said CMC Markets chief market strategist Ashraf Laidi in a note.
Strength in the U.S. unit reduces gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies.
Many other commodity prices also fell, with oil down nearly
1 percent as the dollar's rise curbed buying. Gold tends to
track crude prices, as the metal can be bought as a hedge
against oil-led inflation. []
New York investors showed renewed interest in
exchange-traded funds, with holdings of the world's largest
gold-backed ETF, the SPDR Gold Trust <GLD>, rising nearly 4
tonnes on Wednesday, the trust said. []
Earlier this month the fund saw its biggest outflow since
July as gold prices slipped.
In India, the world's biggest bullion consumer last year,
gold prices fell in the physical market as buyers stayed away,
expecting another fall in prices, dealers said. []
Among other precious metals, silver <XAG=> was at $17.15 an
ounce against $17.67 and platinum <XPT=> at $1,418.50 versus
$1,451.50. Palladium <XPD=> was bid at $365 against $371.50.
Investment interest in the metal was strong, with holdings
of ETFS Physical Palladium <PHPD.L>, an exchange-traded product
operated by London's ETF Securities, rising more than 10,000
ounces on Wednesday to a record 658,743 ounces.
(Editing by Anthony Barker)
