* Worries over NAfrica, euro zone, rates arrest gold's slide
* Fed officials closely watched for clues on tightening
* GFMS sees gold prices rising above $1,600/oz by year end
(Updates prices, adds comment)
By Jan Harvey
LONDON, April 13 (Reuters) - Gold rose in Europe on
Wednesday, recovering after its biggest one-day drop in nearly a
month as the dollar retreated amid expectations the U.S. Federal
Reserve will maintain its accommodative monetary policy for now.
Metals consultancy GFMS issued a widely anticipated industry
report saying gold's decade-long price rally could take the
metal above $1,600 an ounce by year-end, as investors' appetite
for gold sharpens further. []
The company sees gold prices averaging $1,455 an ounce this
year and sticking to a range of $1,319-1,620 an ounce, executive
chairman Philip Klapwijk told delegates at the launch of its
Gold Survey 2011.
Spot gold <XAU=> was bid at $1,458.09 an ounce at 1416 GMT,
against $1,453.95 late in New York on Tuesday. U.S. gold futures
for June delivery <GCv1> rose $5.60 an ounce to $1,459.20.
Prices went below $1,445 an ounce on Tuesday as falling oil
prices knocked commodities, but worries over unrest in North
Africa and euro zone debt, plus expectations the Fed would lag
other central banks in tightening monetary policy, lent support.
"It looks it like held the $1,444 (support level) rather
well yesterday," said Afshin Nabavi, head of trading at MKS
Finance. "(There was) some demand out of India on the physical
front since yesterday. It feels okay here, although it is eyeing
oil and silver rather closely."
The prospect that U.S. authorities could rein in their
accommodative monetary policy is a potential stumbling block for
gold, which as a non-yielding asset has a higher opportunity
cost when interest rates rise.
The metal has risen so far this year as rate rises in the
euro zone, China and Australia benefited other currencies versus
the dollar, but Fed policy is still being closely watched.
Dallas Fed President Richard Fisher said in an article
published on Wednesday that the Federal Reserve risks employing
a monetary policy that is too expansive and allows inflation to
run out of control. []
U.S. POLICY EYED
"The direction of U.S. monetary policy is the key theme this
quarter, and the uncertainty surrounding this includes both the
timing of any tightening decision as well as its
implementation," said UBS analyst Edel Tully in a note.
"This means that gold's movements in the coming weeks will
be highly sensitive to the debates among Fed members."
"While any shift in rhetoric in favour of the hawks would
likely push gold notably lower in the short term, as long as the
probability of further quantitative easing remains in investors'
minds, gold will be well-supported on pullbacks," she said.
Investment demand for gold exchange-traded funds softened.
Holdings of the largest, New York's SPDR Gold Trust <GLD>,
slipping by nearly a tonne on Tuesday. []
Holdings of the largest silver ETF, the iShares Silver Trust
<SLV>, eased around 30 tonnes from a record on the same day, its
biggest one-day outflow in about a month. []
Hefty inflows into the fund this year have accompanied a
sharp rise in silver prices, which peaked at 31-year highs of
$41.93 earlier this week.
"Silver remains the best performer within the complex,
consistent with our previous bullish short-term rating," said
Standard Chartered in a weekly note.
"We still think a long silver position is a very risky
trade, as the gold/silver ratio has dropped to its lowest level
since 1983 and is now more than 40 percent below the average
level of 60 in the last 12 years, but we have stuck to our
short-term bullish call for now."
Silver <XAG=> was bid at $40.34 an ounce against $40.04.
Platinum <XPT=> was at $1,781 an ounce against $1,765.70, while
palladium <XPD=> was at $764.97 against $761.40.
(Reporting by Jan Harvey; editing by Keiron Henderson)
