* 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 prices)
By Jan Harvey
LONDON, July 23 (Reuters) - Gold prices rose above $1,200 an
ounce in Europe on Friday as the markets awaited the outcome of
European bank stress tests, with weakness in the dollar lending
some support to prices.
The results of stress tests are due at 1600 GMT. Signs of
distress in the sector could lift interest in the metal as a
haven from risk, analysts said. []
Spot gold <XAU=> was bid at $1,200.30 an ounce at 1229 GMT,
against $1,195.35 late in New York on Thursday. U.S. gold
futures for August delivery <GCQ0> rose $4.60 to $1,200.20.
The euro <EUR=> firmed 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 eased
against a basket of currencies <.DXY>. []
Typically, weakness in the U.S. unit lifts gold's appeal as
an alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies, but the usual relationship
between the two weakened at the start of the year.
"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.
European shares rose, lifted by strong company results, and
U.S. stock index futures pointed to a higher opening on Wall
Street, though investors were cautious ahead of the results of
stress tests later in the session. []
European Central Bank executive board member Jose Manuel
Gonzalez-Paramo said on Friday the tests would undoubtedly have
a good impact on the banking sector. []
But expectations are that up to 10 lenders will fail the
exam and have to raise capital. []
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 were little changed. [] []
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. []
Demand for physical gold investment products including ETFs,
coins and bars has softened as concerns over financial market
stability have receded, analysts said.
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. []
Longer term, more upside is still seen in the spot price.
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 $18.13 an
ounce against $18.07, while platinum <XPT=> was at $1,538 an
ounce versus $1,521.10 and palladium <XPD=> at $458 against
$454.
(Reporting by Jan Harvey; Editing by Jane Baird)
