* Risk sentiment shaken as Wall Street slides 4 percent
* Dollar index strengthens to 1-month high
* Gold firms despite SPDR gold ETF's consecutive outflow
(Recasts, updates with quotes, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, April 20 (Reuters) - Gold rose sharply on
Monday, with falling stock markets and banking sector concerns
pulling investors back toward the metal.
"Concerns about the banking sector have put equities under
pressure and caused investors to look out for gold as a
traditional safe haven," said Alexander Zumpfe, precious metals
trader at Heraeus.
Spot gold was at $883.25 an ounce at 2:30 p.m. EDT (1830
GMT), up 1.8 percent from its late Friday quote $867.90 in New
York.
U.S. gold futures for June delivery <GCM9> settled up
$19.60, or 2.3 percent, at $887.50 an ounce on the COMEX
division of the New York Mercantile Exchange.
Global stocks <.MIWD00000PUS> tumbled more than 3 percent
after Bank of America Corp <BAC.N> reported a big increase in
troubled loans. []
Gold rose even as the dollar strengthened against the euro
and other major currencies, making dollar-priced bullion more
expensive for non-U.S. investors.
Gold also benefited from bargain hunting after last week's
price decline tempted jewelry and other physical buyers.
"There are bargain hunters lined up," said Afshin Nabavi,
head of trading at MKS Finance in Geneva. "Demand is picking
up. India seems to be hungry for gold prior to the wedding
season."
"Overall the physical demand at these levels is becoming a
bit more interesting."
Frank McGhee, head precious metals trader with Integrated
Brokerage Services, said gold would likely be supported by a
rise in other "flight-to-quality indicators" such as bonds,
U.S. Treasuries and the dollar.
"That's telling you that fear is coming back into the
market," McGhee said.
INVESTMENT OUTFLOW
Aside from Monday's price moves, a second consecutive daily
decline in holdings of the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust, raised fears
investors have been steadily selling the metal to buy back into
other assets such as stocks.
The SPDR Gold Trust ETF saw its largest two-day outflow
since early September last week, with its total holdings
declining 21.7 tonnes or nearly 2 percent on Thursday and
Friday.
London's ETF Securities also said holdings of its three
gold-backed exchange-traded commodities dipped 1.0 percent last
week.
But traders and analysts were relatively sanguine on the
investment flows.
"I don't think that we are at a crucial situation,
considering that we had massive inflows over the previous
months so it was pretty obvious that there had to be some
liquidation at some point of time," Heraeus' Zumpfe said.
Among other precious metals, spot platinum <XPT=> was at
$1,157.50 an ounce, down 3.9 percent from its late Friday quote
of $1,204.50, while spot palladium <XPD=> was at $225.50 an
ounce, off 2.6 percent from its previous finish of $231.
Dealers said dollar strength and wider concerns about
economic growth stemming from the equity market losses had
dented platinum after its recent price recovery.
Silver <XAG=> was at $12.07 an ounce, up 1.9 percent from
its previous finish of $11.84, rising in tandem with gold.
(Additional reporting by Chris Kelly in New York and Veronica
Brown in London; Editing by David Gregorio)
