* Dollar weakens after G7 meeting, boosting interest in gold
* Jewellery demand picks up in India ahead of Diwali
* SPDR Gold Trust reports inflow of bullion
(Updates prices, adds comment)
By Jan Harvey
LONDON, Oct 5 (Reuters) - Gold prices rose in Europe on
Monday, consolidating above $1,000 an ounce, as the dollar
weakened after a meeting of Group of Seven finance ministers at
the weekend.
The softer dollar is boosting interest in gold as an
alternative asset, analysts said, as well as making the precious
metal cheaper for holders of other currencies.
Spot gold <XAU=> was bid at $1,004.80 an ounce at 1417 GMT,
up from $1,001.30 late in New York on Friday. U.S. gold futures
for December delivery <GCZ9> on the COMEX division of the New
York Mercantile Exchange edged up $1.90 to $1,006.20 an ounce.
Senior Deutsche Bank trader Michael Blumenroth said the
market was consolidating in a range between $980 and $1,020 an
ounce.
"We are waiting for some impetus from the other markets, the
currency markets or the stock or bond markets," he said.
He added, however, that as support above $980 had held firm
when prices slipped below $1,000 an ounce last week, gold was
more likely to break higher than lower.
The dollar fell on Monday after a meeting of G7 finance
ministers in Istanbul brought no surprises, which the market
took as a sign policymakers are comfortable with a gradual
dollar decline as part of global economic rebalancing. []
Meanwhile European shares edged higher after hitting a
four-week closing low on Friday in the wake of
higher-than-forecast U.S. jobless numbers. []
U.S. stocks also rose at the open, extending gains after
data showed the Institute of Supply Managers' services index
rose more than expected last month. [] []
Elsewhere oil prices, which are often tracked by gold,
slipped more than 1 percent as investors worried about the pace
of U.S. economic recovery. []
FESTIVAL DEMAND TRICKLES IN
Gold prices took some support from a rise in physical demand
for the metal, with jewellery sales in India, the world's
largest gold consumer last year, recovering ahead of the
festival of Diwali later this month. []
The strong rupee is helping offset a sharp rise in dollar
gold prices, dealers said. Dealers also report buying from Iran
after geopolitical tensions flared up in the Islamic republic
last week.
"Scrap selling has been very slow since last week (and) I am
seeing some light physical demand around -- not huge, but still
surprising at these levels," said Afshin Nabavi, head of trading
at MKS Finance.
"I think these two factors could open the path for a higher
price, especially if the U.S. dollar's weakness continues."
Meanwhile holdings of the world's largest bullion-backed
exchange-traded fund, New York's SPDR Gold Trust <GLD>, edged up
1.221 tonnes or 0.1 percent on Friday. []
Analysts say they are still concerned about the volume of
speculative net long positions in U.S. gold futures, though
these positions declined a touch in the week to Sept. 29 from
the record levels they reached the week before.
"While speculative net long positions fell during the week
of Sept. 29... they continue to stay at a relatively high
level," said Commerzbank in a note. "The risk of position
squaring remains, which could weigh on the gold price."
Among other precious metals, silver also rose, helped by
gains in gold. Spot silver <XAG=> was at $16.25 an ounce against
$16.12. Platinum <XPT=> was at $1,280.50 an ounce against
$1,278, while palladium <XPD=> was at $297 against $294.
(Editing by Anthony Barker)
