* Euro slightly up vs dollar
* SPDR Gold holdings rises closer to record high
* Physical demand underpins bullion
(Recasts, updates prices and comments, previous TOKYO)
By Humeyra Pamuk
LONDON, Dec 22 (Reuters) - Gold firmed in Europe on Tuesday,
lifting off a 6-1/2 week low hit in the previous session, due to
a weaker dollar and physical buying.
Analysts said gold could test lows in the near term after
breaking through $1,100, as investors close positions before the
end of the year, but their appetite to buy bullion on dips would
support the market.
Spot gold <XAU=> was $1,096.50 an ounce by 0949 GMT, versus
$1,092.85 an ounce last quoted late in New York on Tuesday, when
it fell to $1,089.85 an ounce, its lowest since Nov. 6.
"There's some speculative demand on gold on the back of a
slightly weakening dollar," said Wolfgang Wrzesniok-Rossbach,
head of sales at Heraeus. "There's also physical demand, not so
much in Europe but definitely in Asia."
"We're basically sitting on a key support level around
$1,090 an ounce. I don't see a quick break of that level but
also don't see a big recovery on the upside," he said.
The euro <EUR=> was up around 0.3 percent versus the dollar,
while the dollar index <.DXY> was down by 0.16 percent against a
a basket of major currencies, making industrial metals cheaper
for non-U.S. currency holders. []
Third-quarter growth and home sales data from the United
States due later in the day could give markets more clues on
direction, traders said.
ETF HOLDINGS RISE
There has been solid buying on dips in anticipation of
renewed price appreciation in 2010, underscoring extended gains
in the holdings of the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust <GLD>.
SPDR Gold Trust <GLD> said its holdings rose 6.097 tonnes or
0.5 percent to 1,132.708 tonnes on Monday. They hit a record
high of 1,134.03 tonnes on June 1. []
As a sign of robust physical demand, premiums for gold bars
jumped to their highest in months after a drop in bullion prices
spurred buying from investors and jewellers across Asia, dealers
said. []
India's spot gold prices rose on Monday as buying gained
momentum in the market after a correction in prices in the
previous week, dealers said. []
In the longer term, many analysts believed bullion's
potential to rise remained intact.
"The investment sentiment towards gold is very positive,"
said analyst Suki Cooper at Barclays Capital, adding the worries
about inflation and the health of the economy could help support
gold prices.
U.S. gold futures for February delivery <GCG0> were little
changed at $1,095.70 per ounce, compared with $1,096.00 on the
COMEX division of the New York Mercantile Exchange. Futures fell
$15.50 on Monday from the previous day.
Among other precious metals, silver <XAG=> was at $17.08 an
ounce against $17.01 and platinum <XPT=> at $1,419 versus
$1,414.50. Palladium <XPD=> was bid at $361 against $360.50.
(Additional reporting by Chikako Mogi in Tokyo, Editing by Sue
Thomas)
