* Inflation in spotlight as China hikes interest rates again
* Metal holds onto previous day's 1 pct short-covering gains
* Platinum, palladium rally to multi-year highs
(Updates prices)
By Jan Harvey
LONDON, Feb 9 (Reuters) - Gold held close to the previous
session's near three-week high in Europe on Wednesday, supported
by an increased focus on inflation after China's second interest
rate hike in six weeks.
Spot gold <XAU=> was bid at $1,363.24 an ounce at 1221 GMT,
against $1,363.59 late in New York on Tuesday. U.S. gold futures
for April delivery <GCJ1> eased 10 cents to $1,364.00 an ounce.
A change in sentiment towards the precious metal on Tuesday
after it held its ground following China's rate hike prompted a
scramble among speculative investors to cover short positions,
lifting prices more than 1 percent.
"Perhaps there was more strength to the market than some
people had feared," Mitsubishi analyst Matthew Turner said.
"But it will be hard to see further gains unless we get some
really obvious evidence -- maybe, if China's inflation data on
Tuesday is higher than expected," he added.
The hike brought inflation expectations in China into focus.
Analysts polled by Reuters expect inflation to have picked up to
5.3 percent last month, the fastest pace in more than two years,
on the back of soaring food prices. []
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For a graphic on global inflation rates, click:
http://graphics.thomsonreuters.com/11/01/Inflation.html
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On the wider markets, the euro fell against the dollar after
sources said Bundesbank head Axel Weber will not be a candidate
to replace Jean-Claude Trichet as President of the European
Central Bank. European shares edged lower. [] []
U.S. oil prices rose after four consecutive sessions of
losses, while Brent crude rose more than half a percent to above
$100 a barrel due to tighter North Sea supplies. Base metals
prices eased. [] []
MARKETS AWAIT BERNANKE
Financial markets' attention will be focused on Federal
Reserve Chairman Ben Bernanke's testimony to the House Budget
Committee at 1500 GMT, where traders will look for clues as to
the outlook for monetary policy.
"The messaging from Fed speakers so far this week has held
close to market expectations," said UBS in a note. "Today Fed
Chairman Bernanke testifies to Congress, and if he retains his
dovish undertones of last week this may assist gold."
Holdings of the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust <GLD>, dipped to 1,228.56 tonnes on
Tuesday from 1,228.864 tonnes the previous day, although the
hefty outflows seen in January have apparently been staunched.
[]
The SPDR fund saw its second-biggest monthly outflow and the
main silver ETF, the iShares Silver Trust <SLV>, its biggest
ever outflow last month, adding downward momentum to precious
metal prices.
Silver <XAG=> was bid at $30.23 an ounce against $30.31,
after reaching its highest price since Jan. 4 on Tuesday at
$30.35 an ounce.
The gold:silver ratio -- the number of silver ounces needed
to buy an ounce of gold -- recovered from the near five-year low
below 45 it reached on Tuesday to just above that level.
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Graphic on the gold:silver ratio: http://link.reuters.com/pas87r
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Platinum and palladium rose back to multi-year highs on
Wednesday at $1,865 and $836.75 an ounce respectively, boosted
by firmer gold prices, a softer dollar, and expectations that
demand from carmakers for the autocatalyst metals will improve.
Analysts also suspect platinum output from South Africa,
which produces four-fifths of world supply of the metal, and
palladium exports from Russia could be constrained this year.
"Supply side fundamentals and the economic recovery support
a slightly brighter future outlook," said VTB Capital in a note.
Platinum <XPT=> was later at $1,860.49 an ounce against
$1,855.24, while palladium <XPD=> was at $832.97 versus $835.72.
(Editing by James Jukwey)
