* Euro gives up gains vs dollar as U.S. equities slip
* SPDR gold ETF holdings fall 6 T to six-week low
* Coming up: European bank stress test results, 1600 GMT
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, July 23 (Reuters) - Gold fell on Friday, giving up
earlier gains, as caution hit financial markets ahead of the
results of European bank stress tests, with renewed strength in
the dollar helping pull the metal back from $1,200 an ounce.
The results of stress tests are due at 1600 GMT.
Spot gold <XAU=> was bid at $1,190.70 an ounce at 1404 GMT,
against $1,195.35 late in New York on Thursday. Earlier it
climbed as high as $1,203.45. U.S. gold futures for August
delivery <GCQ0> fell $4.50 to $1,191.10.
The euro fell to a session low below $1.28 against the
dollar as investors grew more cautious ahead of the results of
European banks' stress tests and as U.S. equities opened lower.
[]
Historically, strength in the U.S. unit has weighed on gold
prices, as it reduces gold's appeal as an alternative asset and
makes dollar-priced commodities more expensive for holders of
other currencies.
The usual relationship between the two weakened at the start
of the year as both benefited from risk aversion during the
sovereign debt crisis, but has since shown signs of re-emerging.
"As is typical with gold, relationships are changing," said
Societe Generale analyst David Wilson. "We've gone from a
positive correlation between gold and the dollar - both being
safe havens - to a negative one in the space of a few days."
European shares gave up early gains in mid-afternoon trade,
while U.S. stocks opened lower as concerns over the outcome of
the bank stress tests knocked sentiment. [] []
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 fell 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 flat at
$18.07 an ounce, while platinum <XPT=> was at $1,533.50 an ounce
versus $1,521.10 and palladium <XPD=> at $457 against $454.
(Editing by James Jukwey)
