* Euro firms as German data beats forecasts; equities up
* SPDR gold ETF holdings fall 6 T to six-week low
* Coming up: European bank stress test results, 1600 GMT
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, July 23 (Reuters) - Gold rose towards $1,200 an
ounce in Europe on Friday, supported by dollar weakness, as a
retreat in risk aversion led to a return of the two assets'
usual inverse relationship.
All eyes are on the results of European bank stress tests,
due at 1600 GMT. Signs of distress in the sector could lead to
fresh interest in gold as a haven from risk, analysts said.
[]
Spot gold <XAU=> was bid at $1,198.35 an ounce at 0940 GMT,
against $1,195.35 late in New York on Thursday. U.S. gold
futures for August delivery <GCQ0> rose $2.40 to $1,198.00.
"Post the start of the Greek crisis, gold and the dollar
were two classic safe havens, and from then until the last few
days, there has been actually a pretty strong positive
correlation," said RBS analyst Daniel Major.
"Historically, you should get a negative correlation with
the dollar and I think that a bit more of a normalisation in the
risk environment (will lead to that)," he said. "(Investors) are
slightly less concerned about the Armageddon scenario and the
double dip, and that is taking the edge off safe-haven flows."
The euro <EUR=> rose 0.3 percent against the dollar after
the German Ifo index came in above forecasts, following on from
strong euro zone purchasing manager surveys on Thursday. The
dollar fell 0.2 percent against a basket of currencies. []
Weakness in the U.S. unit usually lifts gold's appeal as an
alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies.
European shares were positive on Friday, lifted by strength
in miners and some banks ahead of the results of European bank
stress tests later in the session. []
European Central Bank executive board member Jose Manuel
Gonzalez-Paramo said on Friday the stress tests, which gauge the
health of the EU banking sector, will undoubtedly have a good
impact on the banking sector. []
But Spanish newspaper El Pais reported that several of
Spain's 18 savings banks, including some that have been involved
in recent mergers, have failed tests to see how they would cope
with worsened economic conditions. []
PHYSICAL GOLD DEMAND SOFTENS
Among other commodities, oil prices eased from an 11-week
high to near $79 amid uncertainty over the stress tests, while
copper prices rose. [] []
On the physical gold markets, buyers in India, the world's
largest bullion consumer last year, stayed away for a second day
in anticipation of further price falls. []
Meanwhile holdings of the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust <GLD>, fell
more than 6 tonnes to a six-week low of 1,302.046 tonnes on
Thursday. []
Demand for physical gold investment products like ETFs,
coins and bars has softened as concerns over financial market
stability have receded, analysts said.
Longer term, more upside is still seen in the precious
metal. Swiss bank UBS revised up its 2010 gold price forecast to
$1,205 an ounce from $1,129 on Friday, and its 2011 price view
to $1,295 from $1,250.
"We believe that ongoing pressure on sovereign debt markets,
combined with persistent concern over private sector credit
contraction will raise the spectre of debt monetisation
repeatedly over the next few years," the bank said in a note.
A Reuters poll of 55 analysts, traders and fund managers
released earlier this week showed an average forecast of $1,197
an ounce in 2010, rising to $1,228 next year. []
Among other precious metals, silver <XAG=> was at $18.16 an
ounce against $18.07, platinum <XPT=> was at $1,538 an ounce
versus $1,521.10, and palladium <XPD=> at $456.53 against $454.
(Reporting by Jan Harvey; Editing by Sue Thomas)
