* Euro firms after strong Portuguese debt auction
* Largest gold, silver-backed funds see fresh outflows
* Physical gold demand remains strong in Asia
(Updates prices)
By Jan Harvey
LONDON, Jan 12 (Reuters) - Gold eased on Wednesday after a
successful Portuguese bond auction soothed some concern over the
euro zone's finances and removed some investor desire for
safe-haven assets, though a softer dollar stemmed the slide.
Spot gold <XAU=> was bid at $1,378.72 an ounce at 1610 GMT
against $1,380.45 late in New York on Tuesday, having earlier
risen as high as $1,386.90. U.S. gold futures for February
delivery <GCG1> eased $5.80 an ounce to $1,378.50.
The metal has clawed back some lost ground after posting its
biggest weekly loss since mid-2010 last week, as a focus on more
positive U.S. data raised the prospect that U.S. authorities may
curtail quantitative easing measures sooner rather than later.
However, in the absence of further bad news on euro zone
sovereign debt and U.S. growth, it may struggle to build on last
year's stellar performance, analysts said.
"Gold is being held because of uncertainty, and more than
anything because of the fear factor that has been evident since
the financial crisis," said Credit Agricole analyst Robin Bhar.
"As the economy strengthens, as financial markets normalise,
and in the absence of any further shocks... that is one driver
for gold that will start to unravel."
The euro rose for a third day against the dollar, although
its gains were expected to be short-lived after the Portuguese
debt sale did not fully dispell fears over the self-financing
abilities of the euro zone's more fragile members. []
While the auction did remove some of the need among
investors for safe-haven assets, this persistent concern over
the indebtedness of smaller euro zone economies is likely to
continue to support gold, analysts said.
"With the euro still deep (in the) debt crisis and physicals
using every dip to buy the metal on anticipation of an extended
rise, there is little downside possibility for gold, at least in
this quarter," said Pradeep Unni, senior analyst at Richcomm
Global Services.
"Weakness in the dollar and rising oil will add to
the...reasons to hoard gold."
OIL CLIMBS
Among other commodities, oil prices rose, with U.S. crude
oil futures rising after a government inventory report showed
crude oil stocks fell more than expected last week. []
U.S. crude also rose to within a few dollars of its recent
more than two-year high. Rising oil prices can fuel demand for
commodities as an asset class, lifting gold.
Gold buying in top consumer India eased on Wednesday as
prices rose, but buying remains strong overall across Asia,
particularly in China. Premiums for gold bars hit their highest
in two years on Tuesday. []
"The impressive Chinese demand has been fuelled by lower
prices, the upcoming New Year, and also physical delivery
against the February Shanghai Futures Exchange contract," said
UBS analyst Edel Tully in a note.
"We expect the heavy Chinese demand to persist for another
10 days or so, and turn very light in the five or six days
before the Feb. 3 Chinese New Year, as seen in previous years."
Demand for gold to back exchange-traded funds eased off
further, meanwhile, with holdings of the largest, New York's
SPDR Gold Trust <GLD>, slipping just over 1 tonne on Tuesday.
Its holdings have declined more than 9 tonnes since the start of
the year. []
Holdings of the largest silver ETF, the iShares Silver Trust
<SLV>, also declined, to 10,725.73 tonnes on Tuesday from
10,786.51 tonnes. []
Silver <XAG=> was bid at $29.54 an ounce against $29.50.
Platinum <XPT=> was at $1,792.00 an ounce against $1,765.99,
while palladium <XPD=> was at $799.97 against $782.
(Editing by Alison Birrane)
