* Dollar recovers from 14-mth lows vs the euro
* Gold technically well-placed to break previous record high
* Platinum, palladium hit multi-month highs as gold rallies
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By Jan Harvey
LONDON, Oct 20 (Reuters) - Gold softened in Europe on
Tuesday, falling below $1,060 an ounce, as the dollar rebounded
from its weakest level in 14 months versus the euro, clipping
interest in the metal as an alternative asset.
Platinum and palladium also pared gains after reaching their
highest in more than a year, buoyed by earlier strength in gold
prices and supply concerns.
Spot gold <XAU=> was bid at $1,058.65 an ounce at 1520 GMT
against $1,062.70 late in New York on Monday. Earlier the
precious metal touched a session high of $1,067.70 an ounce,
close to the record high of $1,070.40 it hit last week.
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange rose $1.90 to
$1,059.90 an ounce.
Gold is closely tracking the euro-dollar exchange rate, a
trend analysts say is likely to ultimately lead it back upwards.
"The gold market really comes down to where you think the
dollar is going," said Citigroup analyst David Thurtell. "We are
still pretty bearish on the dollar, so that makes us favourable
to gold."
"People are worried about debt issuance by governments,
inflation problems. It only takes a smalll allocation of fund
portfolios to gold to really lift the market. The gold market is
tiny compared to the bond and equity markets."
The euro relinquished early gains to trade lower against the
dollar after options-related barriers kept it from breaking
above $1.50. []
The U.S. unit earlier slid to 14-month lows against the euro
<EUR=>, as rising risk appetite pressured the dollar.
World stocks <.MIWD00000PUS> hit a new 12-month high on
Tuesday, fuelled by optimism over corporate earnings and the
global recovery after strong results from U.S. heavyweights
Apple <AAPL.O> and Texas Instruments <TXN.N>. []
Standard Bank analyst Walter de Wet said given the dearth of
physical demand for bullion, gold was primarily driven by the
dollar, which in turn was in thrall to sentiment on the equity
markets as earnings season advances.
"We are waiting for a whole bunch of earnings reports to
come into the market, and if the past week's reports are
anything to go by, these ones will also be positive," he said
"If you see equities rising and U.S. Treasuries being sold,
dollars will also be sold, which will make the dollar weaker."
TECHNICAL SUPPORT
Gold is technically well placed to build on the 6 percent
gains it has posted in the last month, analysts who study charts
of past price movements said.
But some market watchers believe weakness in gold's
underlying supply and demand fundamentals puts it at risk of a
correction.
GE Asset Management portfolio manager Nicholas Koutsoftas
told Reuters he felt the metal was overvalued at current levels,
given a dearth of physical demand. []
There has been little reported gold buying by bullion-backed
exchange-traded funds -- a major driver of prices in the first
quarter of 2009 -- with holdings of the largest, the SPDR Gold
Trust <GLD>, unchanged for an eighth day on Monday. []
Jewellery buying in India, the world's biggest gold consumer
last year, was also lacklustre as festival season ended.
Spot silver <XAG=> was at $17.73 an ounce against $17.78.
Platinum and palladium both rose to their highest in more
than a year, with platinum hitting a 13-month high of $1,376 an
ounce and palladium reaching a peak of $335.50, its firmest
since August 2008.
Spot platinum <XPT=> was later at $1,369.50 an ounce against
$1,355.50, while palladium <XPD=> was at $334.50 against $332.
Both metals benefitted from strong underlying fundamentals,
with concern persisting over the outlook for South African
supply as the strong rand boosts producers' relative costs, and
Russian palladium supply still lacklustre.
Palladium demand is also picking up in China, analysts said.
Fellow autocatalyst material rhodium <RHOD-LON> rose $25 an
ounce to $1,750 an ounce on Tuesday, its highest level since
October last year.
(Editing by Veronica Brown)
