* Dollar recovers losses against the euro <EUR=>
* Indian demand wanes after festival season
* Rhodium prices reach highest in a year at $1,800/oz
(Updates prices, adds comment)
By Jan Harvey
LONDON, Oct 21 (Reuters) - Gold prices back above $1,055 an
ounce on Wednesday as an early rise in Wall Street stocks
pressured the dollar, boosting interest in the metal as an
alternative to the U.S. currency.
With physical demand for the metal from jewellers and
investors in exchange-traded funds still lacklustre, gold is at
the mercy of the currency markets, traders said.
Spot gold <XAU=> was bid at $1,056.00 an ounce at 1340 GMT
against $1,054.00 late in New York on Tuesday. U.S. gold futures
for December delivery <GCZ9> on the COMEX division of the New
York Mercantile Exchange eased $1.60 to $1,057.00 an ounce.
Prices have been tracking the euro-dollar exchange rate,
with gold reaching record highs of $1,070.40 last week as the
dollar hit its lowest in over a year versus the single currency.
"Gold does not seem to have a mind of its own," said Afshin
Nabavi, head of trading at MKS Finance in Geneva. "It all
depends on the euro."
He said the $1,050 level was providing solid support for
prices. Despite the gains in gold over the last month,
relatively little scrap is coming back onto the market, compared
with the record levels seen earlier this year, he said.
The dollar gave up the gains it briefly made in early
afternoon trade to slip against the euro <EUR=> after U.S.
stocks turned higher shortly after the open, and as oil prices
pared losses. []
Traders are closely watching the progress of stock markets,
with any decline expected to weigh on risk appetite and dent the
appeal of higher-yielding currencies, boosting the dollar.
U.S. stocks' move higher in choppy trade and pressured the
dollar. European shares fell earlier on Wednesday, weighed down
by financial stocks after a quarterly earnings report from
Deutsche Bank underwhelmed investors. [] []
OIL BACK ON TRACK
Oil prices pared losses to rise back towards $79 a barrel,
having fallen more than 1 percent in earlier trade. Strength in
crude prices tends to benefit gold, which can be bought as a
hedge against oil-led inflation. []
Physical demand for gold remained slow as high prices put
off buyers. In India, the world's biggest gold consumer last
year, buyers stuck to the sidelines as demand linked to last
week's festival period petered out.
"Demand is very dull as Diwali/Dhanteras is over," said an
official from a state-run bullion-dealing bank. []
Among other precious metals, spot silver <XAG=> was at
$17.50 an ounce against $17.45.
Platinum and palladium prices held near recent multi-month
highs, but traders worried about gold's recent gains retreating
and the demand outlook for the metals used in catalytic
converters.
"Overall, we remain constructive on platinum group metals,
but we would not add longs for platinum and palladium, given
that we see a possible correction in gold," Standard Bank said
in a note.
Japanese and Korean carmakers have seen improved quarterly
earnings as government incentive schemes boost car sales, but
currency swings are a risk, they said. []
However, European automakers' shares fell as investors
worried how the sector would cope when incentive schemes run
out. []
Platinum <XPT=> was at $1,352 an ounce against $1,347, while
palladium <XPD=> fell to $331.80 from $334.
ETF Securities saw an inflow of nearly 5,100 ounces into its
ETFS Physical Platinum exchange-traded commodity on Tuesday,
lifting its total holdings 1.4 percent, it said.
Fellow autocatalyst material rhodium <RHOD-LON> rose $50 an
ounce to $1,800 an ounce, its highest level in a year.
(Editing by Sue Thomas)
