* Market jitters return after Germany announces regulation
* Stock markets fall in Europe; euro, oil drop
* Palladium falls more than 5 pct to 7-week low
(Updates prices, adds comment, detail)
By Jan Harvey
LONDON, May 19 (Reuters) - Gold fell 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 after German
Chancellor Angela Merkel said the euro was in danger.
Spot gold <XAU=> was bid at $1,207.65 an ounce at 0949 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 fell $6.80 to $1,207.80 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, and as confidence in the euro waned.
"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
as much as 2.6 percent. [] [] [] []
"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 $18.45 an ounce against $18.90 and platinum <XPT=> at $1,612
an ounce against $1,666.50.
Palladium <XPD=> was the biggest faller, slipping as much as
5.76 percent to a seven-week low of $466.50, as traders reported
fund selling of the metal and risk aversion rose. The metal
climbed to a two-year high of $570.50 last month.
"The price increase has been mainly due to speculation...
and these levels may not be sustainable in the long run unless
the investors have a longer view," said one trader.
Palladium was later at $467.75 against $495.
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.
(Editing by James Jukwey)
