* Equities, euro extend gains as risk appetite improves
* SPDR gold ETF holdings steady at record 1,306.137 T
* Palladium rises 3 pct, further gains seen before year-end
(Updates prices)
By Jan Harvey
LONDON, June 14 (Reuters) - Gold slipped below $1,220 an
ounce in Europe on Monday as improving appetite for assets seen
as higher risk, such as equities and the euro, lessened interest
in the metal as a safe haven investment.
Losses were limited, however, by expectations that
government measures to address elevated sovereign debt levels
might ultimately prove inflationary, and as investors bet
interest rates would stay low.
Spot gold <XAU=> was bid at $1,217.45 an ounce at 1535 GMT,
against $1,225.40 late in New York on Friday. U.S. gold futures
for August delivery <GCQ0> fell $11.20 an ounce to $1,219.00.
"I think we will be stalling here amid sluggish interest and
improving risk sentiment," said Andrey Kryuchenkov, an analyst
at VTB Capital. "In the long run all is good, but for the moment
some will be booking profits."
World stocks rose to their highest in over a week on Monday
due to optimism about the global growth outlook. European
equities reaching a four-week high, and U.S. equities also rose.
[] [] []
Other commodities were broadly higher, with oil prices
rising 2.5 percent and base metals strengthening. Coffee, sugar,
cocoa and grains also rose. [] [] []
The euro <EUR=> also extended gains as appetite for assets
seen as higher risk improved. The single currency recorded its
biggest weekly gain since September last week. []
A stronger euro, and consequently weaker dollar, would in
normal circumstances benefit gold, although in recent months the
usual relationship has inverted as both bullion and the U.S.
currency benefit from rising risk aversion.
While gold prices are coming under some pressure as risk
aversion eases, in the longer term wider economic concerns are
still supporting prices, analysts said.
"There are a lot of people who take a longer-term view,"
said Standard Bank analyst Walter de Wet. "Interest rates are
low, so for the next six to 12 months, conditions still favour
higher gold prices irrespectively of equity markets rallying."
GOLD ETF HOLDINGS AT RECORD
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, were steady at a record
1,306.137 tonnes on Friday. []
Investors still have an interest in holding gold in the
medium- to long-term to protect against potentially inflationary
government measures to service debt.
In a note on Monday, UBS said its economists had pushed back
their expectations for U.S. and euro zone rate hikes. Low
interest rates are positive for gold, because they cut the
opportunity cost of holding non-interest bearing assets.
"While we certainly see inflationary threats ahead through
the potential for the debt monetisation route, that time horizon
is some distance in the future," UBS said in a note.
"Instead, the reality this year of rising interest rates in
the U.S., in the absence of rising inflation or indeed
expectations, would not have been gold supportive. As such, our
forecast for a looser monetary policy environment provides a
positive backdrop to gold over the coming months."
Physical demand from gold's usual chief consumers, such as
India and the Middle East, has been dented by higher prices.
But in a Reuters interview, the vice chairman of the Gem and
Jewellery Export Promotion Council, Rajiv Jain, said Indian gem
and jewellery export sales were expected to rise by at least 7-8
percent in 2011. []
Precious metals rose in line with other commodities.
Palladium <XPD=>, the biggest climber with gains of more than 3
percent, was at $456 an ounce against $439, while platinum
<XPT=> was at $1,559.50 against $1,539.50.
Silver <XAG=> was bid at $18.39 an ounce against $18.18.
(Editing by Sue Thomas)
