* Gold slides towards $1,110/oz on dollar strength
* China says it will be prudent in adding to gold holdings
* Palladium retreats further from 2-year high
(Updates prices, adds comment)
By Jan Harvey
LONDON, March 9 (Reuters) - Gold fell 1 percent in Europe on
Tuesday to below $1,110 an ounce as the dollar climbed on rising
risk aversion, denting interest in the metal as an alternative
asset and making it more expensive for non-U.S. buyers.
Spot gold <XAU=> slipped as low as $1,108.55 an ounce and
was bid at $1,111.05 an ounce at 1348 GMT, against $1,122.85
late in New York on Monday.
U.S. gold futures for April delivery <GCJ0> on the COMEX
division of the New York Mercantile Exchange slipped $12.40 to
$1,111.60 an ounce.
"With the euro below $1.37, gold will be struggling, because
it is not going to get the support from the currencies," said
Saxo Bank senior manager Ole Hansen.
"The upside on the euro seems to be capped by now, and if
that is the case, gold will be as well."
The euro fell 0.6 percent versus the dollar, struggling in
the face of debt concerns in peripheral euro zone countries such
as Greece and Portugal. []
Fitch Ratings said on Tuesday it still has a negative
outlook on Portugal's double-A ratings and was studying the
details of the country's new austerity measures. []
Oil prices also slipped back from eight-week highs on
Tuesday, falling nearly 2 percent at their session lows, on
expectations of a rise in U.S. crude inventories and on the
stronger dollar. []
Gold tends to track crude prices, as the metal can be bought
as a hedge against oil-led inflation.
CHINA OPTS FOR PRUDENCE
China's top foreign exchange manager, head of the State
Administration of Foreign Exchange Yi Gang, said on Tuesday
Beijing will be prudent in adding gold to its official reserves,
wary that such a move would drive prices higher. []
Speculation has been rife in the last year that China would
add to its gold reserves, given that its current holdings make
up only a small proportion of its foreign exchange reserves.
UBS analyst Edel Tully said in a note that given the
price-negative undertones of Yi's comments, the gold market's
reaction to the news had been muted.
"While we would expect more near-term downside for gold once
the news sinks in, it is unlikely to entirely quash market
expectations that China will indeed move to increase its reserve
capacity for gold," she said.
Palladium <XPD=> fell most among the precious metals on
Tuesday, slipping 3 percent as traders cashed in gains after its
rise to two-year highs at $480 an ounce late last week.
The world's biggest palladium producer, Norilsk Nickel
<GKMN.MM>, told the Reuters Global Mining and Steel Summit that
the metal is an appealing investment because future jewellery
and industrial demand will be strong. []
The white metal, primarily used in autocatalysts, has
benefited from well-received February car sales numbers from
China and the United States -- both primarily petrol-engine
markets, which use a higher loading of palladium than platinum.
But traders said the metal's gains may have been overdone.
"We now expect to see the price calming down," said precious
metals house Heraeus in a weekly report. "It appears unlikely
that the metal can hold above the $500 an ounce mark for any
extended period of time; at least not in the near future."
Palladium was at $455.50 against $470, while platinum <XPT=>
was at $1,570 an ounce versus $1,595.50. Among other precious
metals, silver <XAG=> was at $16.93 an ounce against $17.21.
For stories from on Reuters Global Mining and Steel Summit,
click on: []
(Editing by Sue Thomas)
