* Moody's downgrade of Portugal knocks euro versus dollar
* U.S earnings eyed for broader market sentiment
* SPDR gold ETF holdings edge up after week of decline
(Updates prices, adds comment, previous SINGAPORE)
By Jan Harvey
LONDON, July 13 (Reuters) - Gold prices rose back above
$1,200 an ounce in Europe on Tuesday after a ratings agency
downgrade of Portugal knocked the euro, boosting the metal's
appeal as a hedge against currency market volatility.
Spot gold <XAU=> was bid at $1,204.10 an ounce at 0909 GMT,
against $1,194.85 late in New York on Monday. U.S. gold futures
for August delivery <GCQ0> firmed $5.70 an ounce to $1,204.40.
The euro fell broadly after ratings agency Moody's
downgraded Portugal's debt rating by two notches to A1 with a
stable outlook, exacerbating concerns over peripheral euro zone
debt ahead of a Greek T-Bill auction. []
Concern over euro zone sovereign debt drove gold to a record
$1,264.90 an ounce in June, but prices receded after a
successful Spanish bond auction and after a one-year European
Central Bank liquidity scheme expired uneventfully.
The market remains sensitive to such concerns, however.
"What we see from our clients is that there is a lot of
interest in protecting portfolios, and exposure to gold at least
dampens down some of the worst effects of currency volatility,"
said Daniel Smith, an analyst at Standard Chartered.
"There is a continued focus in Asia as well on worries about
inflation," he added. "It still very much remains a tale of two
worlds, which is that the West is still very worried about
currency values, and Asia is worried about potential inflation.
Both of those things are supportive for gold."
The euro has pared some of the hefty losses it made against
the dollar earlier this year, but remains down some 12 percent
from the end of 2009.
On the wider markets, European shares rose more than 1
percent after U.S. aluminium producer Alcoa <AA.N> got the
earnings season off to a strong start. []
"Dataflow is unlikely to have a big influence on investors'
sentiment ahead of the main release of the week... the US retail
sales report due on Wednesday," said Credit Agricole in a note.
EARNINGS IN FOCUS
"The market's focus should remain on corporate earnings and
bank news, thereby signalling a switch from a top-down approach
to a bottom-up analysis of the state of the global economy."
"While the former had led to renewed investors' concerns
over a double-dip in global growth, the latter may fuel hopes of
an ongoing recovery, albeit at a more moderate pace, based on
strong corporate profits."
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For a graphic showing various indicators, including gold,
that may show whether fears for a double-dip recession are
gathering pace, click on: http://r.reuters.com/kuv45m
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Oil reversed early losses on Tuesday to trade flat near $75
a barrel as optimism about the economic recovery offset a report
predicting oil demand growth will slow next year, leaving the
market well supplied. Base metals slipped. [] []
Appetite for gold-backed exchange-traded funds recovered,
with holdings of the largest, New York's SPDR Gold Trust <GLD>,
edging up 0.304 tonnes on Monday after they declined more than 4
tonnes last week. []
Gold demand in India weakened as traders sought lower prices
to execute deals ahead of the festive season, with a softer
rupee, which makes the dollar-priced metal more expensive for
local buyers, also weighing on sentiment, dealers said.
One dealer with a private bank said all of his advance
orders were below $1,190 an ounce. India, the leading consumer
of gold, will celebrate the Hindu festival of Raksha Bandhan on
Aug. 24, and Janmasthami and Ganesh Chaturthi in September.
Among other precious metals, silver <XAG=> was at $17.92 an
ounce versus $17.86, platinum <XPT=> at $1,520 an ounce against
$1,512, and palladium <XPD=> at $454 against $452.
(Reporting by Jan Harvey; Editing by William Hardy)
