* Gold little changed as flight to safety resumes
* SPDR Gold ETF sees small inflow to record levels
(Updates throughout)
By Jan Harvey
LONDON, Feb 27 (Reuters) - Gold firmed in Europe on Friday
as lingering risk aversion amid fresh losses on the equity
markets lifted the metal from the two-week lows it hit earlier
in the session.
Spot gold <XAU=> edged up to $947.40/949.40 an ounce at 1217
GMT from $944.70 late in New York on Thursday. Earlier it
touched a low of $935.70 an ounce.
A slowdown in investment demand and lacklustre jewellery
buying is still weighing on the metal, however.
"There is scope for further weakness with little sign of
much activity from the jewellery market and investment inflows
appearing weak," said Fairfax analyst John Meyer.
Gold is still being bought by risk-averse investors, as
uncertainty lingers over the outlook for the financial sector.
Ailing banks in Europe and the United States sank deeper
into state control on Friday as governments fed them more cash
to subsidise lending and kick start economic activity.
[]
The U.S. government reached an agreement to substantially
raise its stake in Citigroup <C.N>, a person familiar with the
matter said. []
But a dearth of fresh news to fuel upward momentum has
allowed gold to slip more than $60 from the 11-month peak it hit
a week ago, analysts said.
"The second quarter is not one of the strongest because
demand is relatively weak," said BNP Paribas analyst Michael
Widmer. "On top of that jewellery demand is being cleared off by
high prices and price volatility."
"There is a lot of slack that the investors have to pick up,
and given the inflows into ETFs are slowing down a little bit, I
am not sure that the investors are picking up the slack at the
moment," he added.
The strong inflows into gold-backed exchange-traded funds
that pushed prices above $1,000 an ounce last Friday have since
stalled.
Holdings of the world's largest gold ETF, New York's SPDR
Gold Trust <GLD>, were static for much of the week, recording
only a small 0.31-tonne inflow on Thursday. []
"This is not going to be enough to support sentiment in the
gold market, which has now corrected by about 6 percent from its
recent highs," said UBS strategist John Reade in a note.
"(It) will probably continue to decline, at least while the
performance of equities and other risk assets remains less
dreadful than of late," he added.
LACKLUSTRE
As investment flows stall, the lack of buying in the
jewellery sector -- which accounted for 58 percent of global
demand last year, according to the World Gold Council -- is
weighing on prices.
Jewellery demand in India, the world's biggest bullion
market, is lacklustre as buyers await lower prices in the midst
of the wedding season, with a weak rupee making imported gold
expensive.
"There are enquiries but no buyers," said Pinakin Vyaas,
chief manager-treasury with IndusInd Bank in Mumbai. "As the
rupee has depreciated so heavily, the costing is getting
affected." []
India has not imported any gold in February as recent record
prices dampened demand. In the same month last year it imported
23 tonnes of the metal. []
Meanwhile gold inventories monitored by the Shanghai Futures
Exchange meanwhile fell by 27 kg in the week ended Thursday, to
just 6 kg. []
Among the external drivers of gold, the dollar rallied, also
weighing on the precious metal, while oil prices eased nearly 3
percent after posting sharp gains in the previous session as
investors worried about the outlook for demand. []
[]
Among other precious metals, spot silver <XAG=> was at
$13.17/13.23 an ounce from $13.10.
Spot platinum <XPT=> was little changed at
$1,060.50/1,065.50 an ounce from $1,050, while spot palladium
<XPD=> was steady at $194.50/198.50 an ounce from $194.
(Editing by James Jukwey)
