PRECIOUS-Gold off highs as dollar recovers; ECB eyed

                                
 * Equity markets soften in U.S.
* Dollar recovers from 1-month low versus euro
                                
 (Releads, adds comment, updates prices)
                                
 By Jan Harvey
                                
 LONDON, May 5 (Reuters) - Gold was firmer on Tuesday,
supported by uncertainty ahead of a European Central Bank
rate-setting meeting and results of U.S. bank stress tests later
this week, but it came off highs as the dollar recovered losses.
                                
 Weakness on the U.S. equity markets are also helping
underpin the metal, analysts said.
                                
 Spot gold <XAU=> was bid at $903.30 an ounce at 1507 GMT,
against $902.35 an ounce late on Monday, having earlier touched
a high of $915.45.
                                
 U.S. gold futures for June delivery <GCM9> on the COMEX
division of the New York Mercantile Exchange were up $2.20 to
$904.40 an ounce.
                                
 Gold is benefiting from caution ahead of U.S. bank stress
tests and the ECB rates decision later this week, analysts said.
                                
 "This week's ECB meeting... will obviously have an impact on
the dollar/euro rate, and could therefore have an impact on
gold," said Calyon analyst Robin Bhar.
                                
 "There is a lot of uncertainty out there at the moment --
there are the bank stress tests as well."
                                
 Gold prices slipped from highs, however, as the dollar
recovered from a one-month low against the euro. Gold is often
bought as an alternative to the U.S. currency and moves in the
opposite direction to it. [FRX/]
                                
 "The dollar has been one of the main supports to gold over
the last few days," said Bhar.
                                
 The U.S. government has assessed 19 major U.S. banks to
ensure they have sufficient capital to withstand the recesssion:
the results are expected on Thursday. [ID:nN03361040]
                                
 Meanwhile a weak start to stocks trading on Wall Street is
also helping to support gold. U.S. equities opened lower on
profit taking and remain weak. [.N]
                                
  Investment in the precious metal through gold-backed
exchange-traded funds remains relatively lacklustre. Holdings of
the largest gold ETF, SPDR Gold Shares <GLD>, were unchanged on
Monday for the seventh consecutive session.
                                
 In Europe, London's ETF Securities said holdings of its
three gold-backed ETFs firmed 0.5 percent week-on-week to 7.432
million ounces on Monday, while Zurich Cantonal Bank's gold ETF
holdings rose 4.5 percent on Monday from April 1. [ID:nL5943004]
                                
 Analysts say the market is looking ahead to the ECB's
announcement on rates and the result of stress tests on U.S.
banks, both due on Thursday. [M/DIARY]
                                
 If banks need more capital to deal with weakness in the
financial system, risk aversion is likely to return, boosting
the appeal of gold, analysts said. [ID:nN04400200]
                                
 
                                
 OUTPUT
                                
 On the supply side, Russia's main industry lobby said the
country's gold output rose 42 percent in the first quarter to
31.39 tonnes. Russia was the world's fifth largest gold miner
last year, producing 188.7 tonnes, metals consultancy GFMS said.
[ID:nL5956426]
                                
 Elsewhere, Turkey said its gold imports declined in April to
25.698 kg, against 40 kg in March. Year-on-year, they were down
97.5 percent from 1,030 kg. [ID:nL5663459]
                                
 A sharp rise in the amount of scrap jewellery entering the
market has curbed demand for gold from outside Turkey.
                                
 Meanwhile, spot silver <XAG=> tracked gold higher, also
benefiting from dollar weakness. It reached a near six-week high
of $13.59 and was later at $13.35 an ounce against $13.01.
                                
 Among other precious metals, platinum <XPT=> was bid at
$1,126 an ounce, against $1,117, while palladium <XPD=> was bid
at $217 an ounce against $218.
                                
 Both metals have been battered by news of difficulties
facing the car industry, their main consumer. However, platinum
in particular has seen new demand from investors as they take
advantage of lower prices to buy into the metal.
                                
 Zurich Cantonal Bank's platinum-backed ETF saw inflows of
9,522 ounces between April 1 and Monday, lifting its total
holdings of the metal 5.9 percent to 170,322 ounces, it said.
 (Editing by Anthony Barker)