* Dollar recovers from 5-month low vs basket of currencies
* North Korea launches second nuclear test, denting stocks
(Adds comment, updates prices)
By Jan Harvey
LONDON, May 26 (Reuters) - Gold was softer 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 $947.40 an ounce at 1315 GMT,
down from $957.80 an ounce late on Monday. U.S. gold futures for
June delivery <GCM9> on the COMEX division of the New York
Mercantile Exchange were down $11.00 to $947.90 an ounce.
Prices were lower on the day but lifted from their earlier
low of $940.10 an ounce as the dollar slipped from highs and
equities softened.
"On the one side you have the stronger dollar, which
retreated just a little when the U.S. went online, and on the
other you have lower equities and this still very risk-averse
sentiment," said Andrey Kryuchenkov, an analyst at VTB Capital.
"That has helped gold to recover from $940."
The dollar <.DXY> rose, recovering from the five-month low
it hit last week, as investors cautiously awaited U.S. Treasury
debt auctions kicking off later in the session. []
The euro slipped versus the U.S. currency meanwhile after a
media report questioning the health of the German banking system
prompted traders to trim bets against the dollar.
World stocks fell, with Asian shares leading the way, as
tension over North Korean nuclear tests added to questions over
the economic outlook. Weaker equities can divert investment into
the bullion market. []
Gold failed to benefit substantially from the North Korean
tensions. "It is curious (we) didn't see new buying of gold on
the back of North Korea nuclear test, but maybe money gone into
the dollar first," said Fairfax analyst John Meyer.
Traders are looking ahead to 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.
Elsewhere, gold exchange-traded fund holdings firmed a touch
after a period of stability.
On Friday holdings of the world's largest, the SPDR Gold
Trust <GLD>, climbed to 1,118.76 tonnes, while holdings of gold
ETFs operated by Zurich Cantonal Bank and Julius Baer <BAER.VX>
also rose last week. []
MONITORING
"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 $1,122.50 an ounce against $1,149.50 late on Monday, while
palladium <XPD=> was at $228 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.
United Auto Workers' union officials will gather on Tuesday
to hear how many U.S. factory jobs General Motors <GM.N> will
cut. GM has until June 1 to work out its issues with creditors
if it is to avoid a bankruptcy filing. []
(Additional reporting by Maytaal Angel; Editing by Anthony
Barker)
