* Dollar index falls to 4-1/2 mth low, oil hits 6-mth high
* World Gold Council says gold demand rose 38 percent in Q1
* But India's Q1 gold imports slide 83 percent
(Updates prices)
By Jan Harvey
LONDON, May 20 (Reuters) - Gold rose in Europe on Wednesday,
supported by a weaker dollar and firmer oil prices, with a
report showing a jump in first-quarter gold demand also
supporting appetite for bullion.
But rising stock markets and growing optimism the economic
downturn may be bottoming out remain a threat to prices,
analysts said.
Spot gold <XAU=> was bid at $931.75 an ounce at 1126 GMT,
against $924.65 an ounce late in New York on Tuesday.
The dollar against a basket of six major currencies fell to
a 4-1/2 month low on Wednesday, boosting the metal's appeal as
an alternative asset, while oil rose to a six-month high above
$60 a barrel. [] []
"What we are seeing now is probably due to the weaker dollar
and also somewhat higher oil prices," Commerzbank analyst Eugen
Weinberg said. "But I don't think (the rise) is sustainable as
long as sentiment stays as upbeat as it is."
"Before, gold was considered as an insurance against risk,"
he added. "People at the moment are not looking for insurance.
Risk aversion is disappearing, and people are becoming more
upbeat about the future."
European shares rose in early trade on Wednesday but later
dipped back, while world stocks rose for a fourth straight
session. [] []
The Chicago Board Options Exchange Volatility index <.VIX>,
known in markets as the "fear gauge", fell to its lowest levels
since the collapse of Lehman Brothers in September on Tuesday,
suggesting investors are less worried about swings in equity
prices. []
Volatility in the equity markets was a key factor driving
investment in gold as a safe haven earlier in the year.
Gold demand rose 38 percent in the first three months of
2009, the World Gold Council said on Wednesday, as sharply
higher investment offset weaker jewellery buying and industrial
usage. []
WGC investment research manager Rozanna Wozniak said in an
interview with Reuters television she expects investment demand
for gold to remain firm as investors seek a safe store of value
for their money.
CONCERNS
"I have some concerns over how long these green shoots (of
recovery) will last," she said. "It would be great if they did,
but I think overall the uncertainty is going to remain for a
while yet," Wozniak said.
India's gold imports fell 83 percent in the first quarter to
17.7 tonnes a year, the WGC said. Indian gold demand was
depressed by high prices in that period, according to traders.
[]
"The Indian market has always been very sensitive to price
levels and price volatility," Wozniak said, adding she hoped to
see stronger demand in the second quarter in the run-up to the
wedding season.
Platinum and palladium, mainly used by carmakers as
components in autocatalysts, firmed, helped by rising gold
prices and upbeat sentiment as traders, refiners and miners met
for London's Platinum Week.
Refiner Johnson Matthey said in a key report on Monday that
strong Chinese jewellery demand was helping offset weakness in
automotive buying. []
Platinum <XPT=> was quoted at $1,140.50 an ounce against
$1,137.50 late in New York on Tuesday, while palladium <XPD=>
was at $232.50 against $231.
Prices of fellow platinum group metal rhodium <RHOD-LON>
rose $50 to $1,400 an ounce, and are up nearly 6 percent so far
this week. Silver <XAG=> was at $14.28 an ounce against $14.15.
(Editing by Keiron Henderson)
