* Dollar weakens as risk aversion subsides, pressuring gold
* Traders await U.S. GDP data, Fed rates announcement
(Updates throughout, previous TOKYO)
By Jan Harvey
LONDON, April 29 (Reuters) - Gold edged up in Europe on
Wednesday as the dollar lost ground versus the euro, boosting
bullion's appeal as an alternative asset, and as traders took
advantage of lower prices to buy into the metal.
Trading remains cautious, however, ahead of U.S. gross
domestic product data and an announcement on interest rates from
the Federal Reserve later in the session.
Spot gold <XAU=> was bid at $894.35 an ounce at 0904 GMT,
against $891.10 an ounce late in New York on Tuesday.
"Gold is finding support this morning," said Standard Bank
analyst Walter de Wet. "There is some dollar weakness, but a lot
of people are also thinking $885 an ounce is a good entry point
into the metal."
Gold prices slipped more than 2 percent in the first two
sessions of the week as the metal's failure to capitalise
further on a rise above $918 an ounce on Monday disappointed
investors, sparking a wave of technical selling.
Weakness in the dollar versus the euro, which often prompts
buying of gold as an alternative to the U.S. currency, is
helping prices recover. The dollar and the yen fell as risk
aversion subsided, lifting higher-yielding currencies. []
Risk appetite is recovering in response to improved U.S.
economic data, though traders remain cautious over the prospect
of a global swine flu epidemic, which knocked commodities lower
early in the week. []
Easing risk aversion also helped buoy stocks, which regained
lost ground. A recovery in equities in likely to limit gains in
gold, which have benefited in recent months from investors
switching out of stocks and into bullion. []
Appetite for gold from investors in physically backed
exchange-traded funds is cautious after rising sharply early in
the year. Holdings of the largest gold-backed ETF remained
unchanged for a third consecutive session on Tuesday. []
Indian gold buyers continued to trickle in ahead of the
wedding season, with a dip in prices encouraging purchases. Gold
prices in rupees are expected to ease further in the summer but
rise by year-end. []
POLICY
Traders are looking ahead to U.S. GDP data later for fresh
clues on the direction of the economy. A survey conducted by
Reuters forecast a 4.9 percent decline in GDP, against a 6.3
percent drop in the final fourth-quarter estimate.
If the result is disappointing, it could support gold.
The Federal Open Market Committee also completes its two-day
meeting on interest rate policy later, and is due to make an
announcement on rates at 1815 GMT.
Silver prices, which also slipped on Tuesday, edged higher
in line with gold. Spot silver <XAG=> was bid at $12.52 an ounce
against $12.45 late on Tuesday.
Among other precious metals, spot platinum <XPT=> was bid at
$1,083.50 an ounce against $1,087.50, while spot palladium
<XPD=> was bid at $214 an ounce against $213.
Both metals, which are chiefly used in autocatalysts,
tumbled significantly on Tuesday after General Motors announced
restructuring plans, with falling gold prices adding pressure.
According to a study of past price movements, the technical
outlook for both metals is now negative, Commerzbank analysts
said in a note.
However, London-based ETF Securities said it saw a small
inflow into its platinum ETF <PHPT.L> on Tuesday. The fund's
holdings rose just over 3,500 ounces or 1 percent.
(Editing by James Jukwey)
