(Adds dropped words at end of quote in paragraph 4)
* Gold firms almost 1 percent from 2-1/2 month lows
* Steadier stock market sentiment seen capping gains
* Asian buyers, ETF investors likely to support prices
(Adds quotes, updates prices, changes dateline from TOKYO)
By Veronica Brown
LONDON, April 7 (Reuters) - Gold prices firmed on Tuesday as
investors covered short positions, helping the market to rebound
from 2-1/2 month lows, but steadier stock markets were keeping a
lid on gains having damaged near-term sentiment.
Spot gold <XAU=> was up 1.15 percent on the day at
$878.40/879.90 per troy ounce after hitting an intraday high of
$879.55 compared with New York's notional close of $868.80.
A recent rally in global shares has revived investor
appetite for so-called higher risk assets, dulling the allure of
bullion, while a drop below key technical levels around $880 and
$870 on Monday pushed it to a 10-week low of $864.30.
"Gold has performed a safe-haven status but with increased
optimism and possibly increased friendliness towards risk in
lending in the financial sector, the very short-term outlook for
gold has been damaged," said Geery Schubert, director or
precious metals at Fortis in London.
Gold prices are still down about 13 percent from an 11-month
high above $1,000 hit in February. But analysts said a dose of
reality on the overall vulnerability of the global economy could
well see it topping the $1,000 mark again.
"Anywhere under these levels, down to $845 are all buy
levels," Schubert said.
INDIA BUYS
Falling bullion prices prompted India to buy some gold
earlier in the global session, raising hopes the world's largest
consumer could be looking for more during the wedding season,
dealers said. []
Though some traders said gold may have been oversold, the
metal remains vulnerable for now to any signs of investors
shifting money into other assets.
"We are seeing short-covering today, but we might test $850
as equities are starting to become more attractive, and there is
some shift of risk appetite," a Sydney-based trader said.
In global markets, world stocks steadied after hitting a
two-month high in the previous session as investors awaited the
start of the U.S. corporate earnings season. []
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,127.37
tonnes as of April 6, unchanged from April 3 and just below a
record 1,127.44 tonnes.
Exchange-traded funds (ETFs), which back up the securities
they issue with physical commodities, are a major element of
demand.
For details on gold holdings at the ETF listed in New York
and co-listed on other exchanges, click on:
http://www.exchangetradedgold.com/iframes/usa.php
In other metals, platinum prices <XPT=> rose to $1,155/1,165
per ounce from $1,140.50 late in New York on Monday.
Platinum prices were seen getting a boost from prospective
investment demand after news on Monday that a unit of London's
ETF Securities had filed with the Securities and Exchange
Commission to register platinum and palladium trusts in the
United States. []
"If approved (this) could trigger significant price gains
again, but is likely to see significant opposition from the
mining sector as well as industrial and auto users," James Moore
of TheBullionDesk.com said in a note to clients.
Palladium also firmed slightly to $224.00/227.00 from
$221.00 on Monday, while silver <XAG=> firmed in tandem with
gold to $12.22/12.29 from $12.10 on Monday.
(Reporting by Veronica Brown; Editing by Sue Thomas)
