* Dollar index weakens as risk aversion ebbs
* Equities rise in Europe, United States; commodities higher
(Updates prices, adds comment)
By Jan Harvey
LONDON, July 6 (Reuters) - Gold erased early gains on
Tuesday to tumble to a six-week low as selling precipitated by a
sharp rebound in equities pushed the metal through key technical
support levels near $1,200 an ounce.
Spot gold <XAU=> slipped as low as $1,189.55 an ounce and
was bid at $1,192.00 an ounce at 1409 GMT, against $1,206.95
late in New York on Monday. U.S. gold futures for August
delivery <GCQ0> fell $14.80 an ounce to $1,192.90.
The $1,200 mark is providing good support to gold, with
physical demand emerging as prices slip further from June's
record $1,264.90. But its swift retreat from that level has
knocked some investors' confidence in the metal, traders said.
"The recent volatility is keeping a lot of people cautious,"
said Afshin Nabavi, head of trading at MKS Finance. "But in my
view, the world has not changed, politically or economically.
"But there are physical-related buyers looking for
bargains," he added. "So let's see who is going to win."
Concern over the sluggish economic recovery and the
stability of the financial markets has lifted demand for gold as
a haven from risk this year, pushing prices sharply higher. As
those fears recede, gold could struggle to hold onto its gains.
On the wider markets, world stocks bounced on Tuesday from a
recent five-week low in a broad risk rally that boosted oil
prices, while investors sold off the dollar and government
bonds. []
European shares <> were up 2.65 percent in the early
afternoon, while Wall Street stocks opened higher. [] []
U.S. stocks held onto their early gains after data showed
non-manufacturing activity grew at a slower rate in June than
expected, according to the Institute for Supply Management.
[]
Better appetite for risk hurt the dollar, which slipped 0.7
percent against a basket of six other currencies <.DXY>, but
boosted commodities, with oil climbing 1.3 percent. [] []
GAINS EXPECTED
In the longer term, uncertainty over the direction of the
global economy and other factors are still seen supporting gold,
with many analysts still seeing the metal ending the year at
record highs above $1,300 an ounce.
"Given the host of different factors -- ranging from
concerns over the shape of economic recovery to fears of
inflation supporting gold prices -- remain unhinged
(irrational), we would expect gold prices to test higher highs
as the year unfolds," said Barclays Capital in a note.
Physical gold demand picked up a touch after last week's
correction from record highs, as the metal became more
affordable for buyers.
Indian buying continued as traders in the world's biggest
gold consumer picked up bargains ahead of a second round of
festivals and watched the rupee for direction, dealers said.
[]
Silver <XAG=> was at $17.65 an ounce versus $17.75, platinum
<XPT=> at $1,508 an ounce against $1,506.50 and palladium <XPD=>
at $432.50 versus $428.
"Since late May, a significantly lower platinum price has
prompted very real demand, both industrial and for jewellery,"
said UBS analyst Edel Tully in a note.
"Chinese jewellery demand -- as measured through platinum
turnover on the Shanghai Gold Exchange -- has been particularly
apparent since mid May."
(Editing by Keiron Henderson)
