* Equities steady, Wall Street closed for holiday
* SPDR gold ETF reports fresh outflow on Friday
* Physical gold demand recovers slightly as prices decline
(Updates prices)
By Jan Harvey
LONDON, July 5 (Reuters) - Gold eased below $1,210 an ounce
in Europe on Monday as the risk aversion that drove prices to
record highs in June abated, with a firmer dollar and caution
during the U.S. Independence Day holiday also weighing.
Spot gold <XAU=> was bid at $1,206.45 an ounce at 1533 GMT,
against $1,210.60 late in New York on Friday. U.S. gold futures
for August delivery <GCQ0> eased 60 cents to $1,207.10 an ounce.
Gold fell 3.4 percent last week, retreating further from the
record $1,264.90 it hit in June, as the extreme risk aversion
linked to fears over sovereign debt issues in European countries
such as Spain abated, removing haven demand for the metal.
Many analysts are predicting a soft summer for the metal,
with physical demand seasonally weak and investment easing after
a strong start to 2010. However, concerns over the outlook for
the wider markets are set to support the metal longer term.
"Our sense is that the correction is temporary," said
Michael Lewis, head of commodities research at Deutsche Bank.
"What you might see is that after July, when we are hoping
the Spanish situation and the sovereign bank redemptions start
tailing off, you could start to see the dollar weakening again."
The dollar firmed on Monday, up 0.25 percent against a
basket of six other currencies and 0.3 percent versus the euro
<EUR=>. Strength in the unit makes dollar-priced commodities
more expensive for holders of other currencies. []
A drop in holdings of the world's largest gold exchange
traded fund, New York's SPDR Gold Trust <GLD>, after relatively
steady inflows throughout June also reflects weaker investment
appetite for the metal, Commerzbank analyst Eugen Weinberg said.
The SPDR gold trust reported an outflow of a further 9,780
ounces on Friday, after a decline of just over 39,000 ounces in
the previous session, its first dip since early June. Its
holdings hit a record 1,320.436 tonnes that month. []
"Most of these purchases were driven by fear, and fear seems
to be leaving the market," Weinberg said. "People are not so
afraid of data at the moment, and it appears measures by the
European Central Bank are enough to hold the crisis.
"We think during the third quarter stagnation or even
falling prices are possible," he added. "But in the fourth
quarter, we again expect further price gains, and expect prices
to reach new all-time highs, probably above $1,300."
SLOWDOWN FEARED
On other markets, European share trading volume dwindled as
the closure of Wall Street for Independence Day kept investors
sidelined. []
Oil prices gave up early gains to turn lower amid lingering
concerns over demand, while base metals such as copper, zinc and
lead gained ground after last week's drop. [] []
Analysts reported some improvement in physical demand for
gold as prices declined.
"Jewellery manufacturers are likely to buy fresh stocks on
sharp price dips to lend further support to the market," Fairfax
investment bank said in a note.
Buying of gold in the world's top bullion consumer, India,
was pressured by a nationwide strike in the country over a fuel
price hike, however. []
Among other precious metals, silver <XAG=> was at $17.72 an
ounce versus $17.80. Platinum <XPT=> was at $1,504.50 an ounce
against $1,496.50 and palladium <XPD=> at $428.25 against $430.
"For now, $1,500 in platinum and $425 in palladium are
acting as a 'home' for prices," said UBS analyst Edel Tully in a
note. "At these levels, both metals are trading close to
fundamental value."
She said much of the speculative element to the metals'
price rise earlier in the year had now been removed.
"This will not insulate the metals from further downside
pressure in coming months should concerns about global growth
escalate, but the clearing out of the excessive speculative
overhang should make them more resilient to the downside."
(Reporting by Jan Harvey; Editing by Alison Birrane)
