* Gold holds firm as dollar wilts
* Silver prone to more losses
* Coming up: U.S. Dec housing starts; Jan 19, 1330 GMT
(Updates with comment, refreshes prices)
By Amanda Cooper
LONDON, Jan 18 (Reuters) - Gold rose on Tuesday for a second
day, drawing strength from the dollar's decline against the euro
as well as from Asian consumption and a degree of uncertainty
over Europe's debt crisis.
Gold has fallen more than 3 percent this month, under
pressure from investors eager to cash in on the 30-percent price
gain of 2010 and also from a waning need for safe-haven assets
as data paints a picture of a more robust global economy.
The dollar extended losses against the euro <EUR=> after a
measure of German business confidence hit its highest since
July, outstripping expectations and assuaging some concern about
the euro zone's largest economy.. []
Spot gold <XAU=> rose 0.7 percent to $1,371.30 an ounce by
1520 GMT, while U.S. February gold futures <GCG1> rose 0.8
percent to $1,371.00.
Concern is moderating about the health of the euro zone and
the U.S. economy so gold is attracting less in the way of
safe-haven flows, while the current uptick in physical demand
will likely fade once the Lunar New Year celebrations end.
"As far as gold is concerned, there's not that much kick or
drive out there," said VTB Capital analyst Andrey Kruychenkov.
"The inverse correlation with the dollar and the correlation
with the euro have broken down and gold is in a bit of limbo. On
the downside there is physical support ... the Indian and
Chinese are buying on price pullbacks, however this physical
support is going to die out."
DOLLAR LINK ERODES
Gold usually benefits from any decline in the dollar, but
has not been able to do so to any great extent this month. The
dollar index <.DXY> has fallen by nearly half a percent since
the start of the year, and yet the gold price has also declined.
In light of the stronger data and expectations for robust
fourth-quarter U.S. earnings, gold could encounter more pressure
and Societe Generale analyst David Wilson said ultimately
monetary policy in the United States would be the deciding
factor in the direction of the bullion price.
"It really all depends on whether (Federal Reserve Chairman
Ben) Bernanke gets his way and there is further quantitative
easing, which is still being talked about," Wilson said.
"If there is further quantitative easing there would be more
upward support for gold."
The Federal Reserve's $600 billion bond-buying programme to
stimulate economic growth in the United States has ignited
concern about an unwelcome pickup in inflationary pressures and
a broad-based decline in the dollar, both of which would prove
beneficial to gold.
This week's U.S. banks earnings, expected to be strong,
could give investors more reason to be optimistic about the
sector and the economy in general. []
Reflecting the improved consumer appetite for gold in Asia,
premiums for gold bars rose on Monday to hit another two-year
high as jewellers from China rushed to buy ahead of the Lunar
New Year, while purchases from the electronics sector helped
stir up physical trading in Japan, dealers said. []
Spot silver <XAG=> rose more than 2 percent to $28.84 an
ounce, yet after 2010's 80-percent gain, investors have punished
silver more harshly than gold, bringing the losses for the month
so far to about 8 percent and analysts expect more declines.
"... we are at a loss to explain silver's relative and
absolute price surge from a fundamental standpoint. Accordingly,
we expect silver to be a slight underperformer in the current
year," wrote Swiss commodity fund manager Tiberius in a monthly
report.
In the platinum group metals, palladium <XPD=> gained
another 1.5 percent to reach $802.22 an ounce, pushing the price
close to last week's ten-year highs, while platinum <XPT=> was
last up 1.1 percent at $1,819.24.
(Additional reporting by Rujun Shen in Singapore; editing by
Keiron Henderson)
