* Gold, silver, platinum slip to three-week lows
* Dollar index turns higher, pressuring precious metals
* London palladium ETC holdings hit record
(Releads, updates prices, adds background)
By Jan Harvey
LONDON, Oct 28 (Reuters) - Gold prices slipped to a
three-week low in Europe on Wednesday, testing technical support
above $1,030 an ounce, as the dollar index <.DXY> edged higher,
eroding interest in the precious metal as an alternative asset.
The precious metal is also suffering from weakness in
physical demand, with the world's largest gold exchange-traded
fund reporting a second daily outflow on Tuesday, dealers said.
Spot gold was bid at $1,033.10 an ounce at 1240 GMT, against
$1,038.80 late in New York on Tuesday. Earlier it touched a low
of $1,030.10 an ounce.
Analysts say this week's price correction is not surprising,
given the strength of its upward move since early September.
"Gold is behaving in textbook fashion," Calyon metals
analyst Robin Bhar told Reuters. "In any bull market you have to
confirm support, and in this market, support is in the $1,030
area, which was the previous high."
He said while interest in physical gold jewellery and ETFs
was waning, possibly supporting the case for a further pullback,
both this and the dollar rebound looked to be temporary.
"All the longstanding bull factors for gold -- inflation,
dollar weakness, unhappiness with the monetary system as it
stands and what governments are doing to their paper currencies
-- are still there," he said. "The uptrend remains intact."
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange fell $1.40 to
$1,034.00 an ounce.
Gold has come under pressure from a rise in the dollar
index, which gauges the U.S. unit's performance against a basket
of six major currencies. []
The dollar has benefited from a slide in global stock
markets, which has prompted traders to cut risk exposure.
European shares hit a three-week low on Wednesday. []
U.S. equity futures fell, while world stocks <.MIWD00000PUS>
also touched a three-week low, as investors worried about the
pace of economic recovery after disappointing U.S. consumer
confidence data on Tuesday. []
CHART SUPPORT EYED
From a technical perspective, support for a move higher in
gold is reliant on it holding firm above its previous
longstanding record high near $1,030 an ounce, analysts who
study past price charts to determine future moves said.
"As long as it stays above the $1,028/23 support area,
(gold) will remain near-term bullish and once again target...
$1,066.30 and the mid-October high at $1,071.29," Commerzbank
said in a note.
"Failure at $1,023 would indicate that a slip towards the
55-day moving average at $1,001.71 and the major psychological
$1,000 mark is probable."
Physical gold demand remains relatively lacklustre, with the
largest gold ETF, New York's SPDR Gold Trust <GLD>, reporting a
second consecutive daily outflow on Tuesday. []
Gold buyers in India, the world's biggest bullion consumer
last year, trickled in as falling prices sparked some bargain
hunting, but a weak rupee dented buying interest. []
Among other precious metals, spot silver <XAG=> was the
biggest faller, as losses in gold pressured it to a three-week
low of $16.29. It was later at $16.34 an ounce against $16.65.
Platinum <XPT=> was at $1,312 an ounce against $1,312,
having hit its lowest since Oct. 6 at $1,303.50, while palladium
<XPD=> was at $323 against $325.50.
The metals are being supported by supply concerns from major
producer South Africa and hopes demand from carmakers, the main
buyers of platinum and palladium, will improve.
ETF Securities reported on Wednesday that holdings of its
palladium-backed exchange-traded commodity rose 2.2 percent to a
record on Oct. 27. Its gold and platinum funds also saw inflows.
[]
(Editing by Sue Thomas)
