* Gold tracks euro lower after stress tests meet view
* Gold to end down for second week; rangebound trade seen
* SPDR gold ETF holdings fall 6 T to six-week low
* Coming up: U.S. June new home sales due Monday
(Recasts, adds comments, updates prices, changes byline,
dateline, previous LONDON)
By Frank Tang
NEW YORK, July 23 (Reuters) - Gold fell on Friday but
largely held its ground after stress tests showed that seven
European banks would not be strong enough to withstand another
recession, and there were few surprises to stir safe-haven
demand.
Analysts had expected five to 10 banks to fail the test. As
expected, no big banks failed the health check, but banks in
Germany and Greece were seen as weak spots and in need of
restructuring. [] []
James Steel, chief commodities analyst at HSBC, said
investors did not rush into gold, viewed as a safe haven in
times of economic uncertainty, because the test outcome has
already been factored into prices.
"I think this stress test has gone reasonably well
according to assumptions. So, we haven't had very much a flight
to quality buying in the gold market," Steel said.
After the stress tests results, gold market largely took
the lead from the euro, which fell against the dollar on
worries the tests weren't strict enough to reveal the true
health of the sector, traders said. []
Spot gold <XAU=> was at $1,189.65 an ounce at 1:57 p.m. EDT
(1757 GMT), against $1,195.35 late in New York on Thursday.
Earlier it climbed as high as $1,203.45 on economic optimism.
U.S. gold futures for August delivery <GCQ0> settled down
$7.80 at $1,187.80.
Gold is on track to close lower for a second straight week,
as prices has still failed to break out of a broad range
between $1,180 and $1,220.
Earlier this week, gold had challenged an important bullish
support line at below $1,180 an ounce, but the metal bounced
off that support level, which was seen as a natural entry point
among technical analysts.
A stronger dollar against euro has pressured bullion this
week.
The usual inverse relationship between gold and the dollar
too weakened at the start of the year as both benefited from
risk aversion during the sovereign debt crisis, but has since
shown signs of reemerging
.
"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."
Similar to gold, Wall Street showed a mute reaction to the
stress test, but stocks climbed as solid corporate earnings and
a dividend hike by bellwether General Electric boosted
sentiment. []
PHYSICAL DEMAND SOFTENS
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. []
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 $18.07 an
ounce against $18.07, while platinum <XPT=> was at $1,540.50 an
ounce versus $1,521.10 and palladium <XPD=> at $465 against
$454.
Prices at 1:52 p.m. EDT (1732 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCQ0> 1187.80 -7.80 -0.7% 8.4%
US silver <SIU0> 18.101 -0.019 0.0% 7.5%
US platinum <PLV0> 1542.80 13.40 0.9% 4.9%
US palladium <PAU0> 466.75 9.85 2.2% 14.2%
Gold <XAU=> 1189.35 -6.00 -0.5% 8.5%
Silver <XAG=> 18.06 -0.01 -0.1% 7.2%
Platinum <XPT=> 1540.50 19.40 1.3% 5.1%
Palladium <XPD=> 465.00 11.00 2.4% 14.7%
Gold Fix <XAUFIX=> 1190.50 -8.25 -0.7% 7.8%
Silver Fix <XAGFIX=> 18.17 35.00 2.0% 6.9%
Platinum Fix <XPTFIX=> 1541.00 4.00 0.3% 5.1%
Palladium Fix <XPDFIX=> 460.00 2.00 0.4% 14.4%
(Additional reporting by Jan Harvey in London; Editing by
Sofina Mirza-Reid)
