* European stocks buck downwards trend in global markets
* Dollar weakens versus euro, taking pressure off gold
(Updates throughout, changes dateline - pvs TOKYO)
By Jan Harvey
LONDON, April 21 (Reuters) - Gold rose on Tuesday as fears
over the health of the U.S. banking sector boosted its haven
appeal, with traders eyeing the stock markets for direction.
Shares fell in Asia after a steep rise in bad debt at Bank
of America rekindled fears over the stability of financial
stocks, but swung from lower to higher in early European trade.
Spot gold <XAU=> was bid at $888.60 an ounce at 0931 GMT,
against $884.15 an ounce late in New York on Monday.
"The stock markets recovered well over the last week, which
is where the pressure on gold came from," said senior
Commerzbank trader Michael Kempinski.
As volatility in stocks has picked up once more, "people
have discovered gold as a safe haven again", he said, adding
that physical buying of coins and bars when prices dipped under
$880 an ounce has also helped put a floor under prices.
Gold demand in India, the world's largest bullion buyer, has
lifted from lows as prices have fallen, with trader MMTC Ltd
saying it will import 9-10 tonnes this month. []
Evidence of further troubles linked to the global financial
crisis from banks, manufacturers and whole economies has snapped
a six-week global stocks rally. []
European shares bucked the global trend for stock markets to
fall on Tuesday, though the MSCI world stock index
<.MIWD00000PUS> declined after a fall in Asian equities.
[]
The dollar weakened a touch versus the euro as investors
took profits after the previous session's gains. Gold is often
bought as an alternative asset to the U.S. currency and
typically moves in the opposite direction to it. []
"It was interesting to us that both gold and the U.S. dollar
moved directionally together (on Monday), a sign of increased
investor risk-aversion," said HSBC in a note.
"If equity markets continue to retrace, gold prices are
likely to trade higher."
LINGERING
Nonetheless, concerns over investment demand are lingering
after key gold-backed exchange-traded funds recorded outflows
last week. Holdings of the world's largest gold ETF, New York's
SPDR Gold Trust <GLD>, fell 21.7 tonnes last week. []
London's ETF Securities said its largest gold-backed
exchange-traded product, Gold Bullion Securities <GBSx.L>, saw
an outflow of 2.3 percent in the week to Friday. []
"The very elastic investment demand for gold is flattening
out, with record inflows into gold ETFs finally showing the
first signs of easing last week," said VTB Capital analyst
Andrey Kryuchenkov in a note.
With the dollar showing signs of strength and stock markets
taking on a firmer tone, investment interest will have to remain
strong to support prices.
Among other precious metals, spot platinum <XPT=> was bid at
$1,165.50 an ounce against $1,159.50, while spot palladium
<XPD=> was bid at $224 an ounce against $225.50.
Dealers took profits on the metals on Monday. Demand
concerns remain, with interest from the main consumers of the
metal, carmakers, slumping after a fall in auto sales.
Although investment buying, especially from ETFs, jumped in
the first quarter, this still represents only a small proportion
of total demand for platinum.
The world's number four platinum producer, Aquarius Platinum
<AXP.L>, said its PGMs production fell more than a quarter in
the three months to end March from the quarter before, a dip
partly attributed to seasonal factors. []
Fellow autocatalyst material rhodium <RHOD-LON> rose another
$50 on Tuesday to $1,625 an ounce. Prices have climbed nearly 40
percent since last Tuesday -- albeit from lower levels -- amid
hopes the downturn in the car industry may be bottoming out.
Ruthenium <RUTH-LON>, used to make computer hard discs, also
rose nearly 7 percent on Tuesday to $80 an ounce, from $75 a day
before. Silver <XAG=> was bid at $12.16 an ounce against $12.04.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
