* Market jitters return after Germany announces regulation
* Stock markets fall in Europe, euro, oil drop
* Palladium falls more than 4 pct as industrial metals sold
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, May 19 (Reuters) - Gold eased in Europe on
Wednesday, caught up in selling of other assets like stocks and
the euro, after Germany's move to ban some naked shorting and
German Chancellor Angela Merkel said the euro was in danger.
The precious metal recovered from earlier lows, however, as
an uptick in risk aversion prompted some haven buying of gold at
lower prices.
Spot gold <XAU=> was bid at $1,214.95 an ounce at 0857 GMT,
against $1,219.70 late in New York on Tuesday. U.S. gold futures
for June delivery <GCM0> on the COMEX division of the New York
Mercantile Exchange rose 60 cents to $1,215.20 an ounce.
The metal earlier slipped as low as $1,205.60 an ounce,
caught up in selling of other assets in response to Germany's
move, which analysts said had raised doubts over the outlook for
economic recovery.
"We notice clear signs of nervousness in the gold market,
taking into account the overnight developments in euro zone,"
said Pradeep Unni, senior analyst at Richcomm Global Services.
"Investors seem to be taking their money out of bullion
partly to lock profits, but more importantly to pay the margin
calls arising out from other markets."
Germany announced on Tuesday a ban on some high-risk bets
that prices of bonds and stocks will fall, in an attack on the
financial speculation on which it blames much of the euro zone's
debt crisis. []
The euro <EUR=> fell to a fresh four-year low against the
dollar in response, while oil prices dropped more than 2
percent, base metals prices retreated and European shares fell
sharply at the open. [] [] [] []
"Whilst the move is apparently designed to limit intraday
market volatility, it leaves the euro open to further attack,"
said Credit Agricole in a note.
"The worry is that the move is deemed a panic response to
the situation and that if the market cannot respond to this by
selling equities or debt, they will do so by offloading the
currency."
INVESTMENT FIRM
Investment in gold stood firm, with holdings of the world's
largest gold-backed exchange-traded fund, New York's SPDR Gold
Trust <GLD>, steady at a record 1,217.108 tonnes on Tuesday.
Holdings of gold-backed exchange-traded commodities operated
by London's ETF Securities have risen nearly 700,000 ounces or 9
percent so far this month to 8.437 million ounces.
Gold could correct further before resuming any uptrend,
technical analysts at Barclays Capital, who study charts of past
price moves to determine the future direction of trade, said.
"Gold has corrected lower as momentum and sentiment unwind
from recent extremes," they said in a note. "Having reached our
initial $1,210 target, the correction could extend further."
"However, as price approaches the $1,183 May 10 low and the
21 day average at $1,187, we are looking for reasons to reload
bullish positions, as the bigger picture still points to
significantly higher levels later in the year," they added.
Other precious metals also declined, with silver <XAG=> bid
at $18.59 an ounce against $18.90 and platinum <XPT=> at $1,629
an ounce against $1,666.50.
Palladium <XPD=> was the biggest faller, slipping nearly 4.5
percent to $472.80 against $495.
"Platinum group metals and silver are lower as well, and you
could argue that PGMs are down as a result of risk aversion,"
said James Moore, an analyst at TheBullionDesk.com.
Silver, platinum and palladium are more industrial in use
than gold, and are therefore most exposed to weakness in
economic activity.
They are tracking losses in base metals, which have slipped
as Germany's new regulation has raised doubts about the outlook
for economic recovery.
(Reporting by Jan Harvey; Editing by Amanda Cooper)
