* Risk aversion sparks dip in equities ahead of earnings
* Physical demand for gold ebbs as prices recover
(Updates throughout, changes dateline - pvs TOKYO)
By Jan Harvey
LONDON, April 8 (Reuters) - Gold ticked higher in Europe on
Wednesday, building on the last session's 1.5 percent gains, as
a rise in risk aversion ahead of an expected grim U.S. corporate
earnings season prompted a slide in equity markets.
Spot gold <XAU=> rose to $886.70/887.70 an ounce at 0928 GMT
from $880.05 late in New York on Wednesday. Prices eased 3
percent last week as stock markets moved higher after the G20
leaders' summit in London.
"There is still a lot of systemic risk in the financial
system," said Standard Bank analyst Walter de Wet. "That is not
going to be solved quickly with the G20 meeting."
"People are seeing this (price dip) as an opportunity to
enter the market."
World stocks slipped for a third session, while perceived
safer assets such as government bonds and the yen gained after
poor earnings from aluminium group Alcoa <AA.N> sparked concerns
over the outlook for earnings season. []
The MSCI world equity index <.MIWD00000PUS> fell more than 1
percent, after hitting a two-month high on Monday. Firmer stock
markets had pressured gold, as investors sold the precious metal
to buy back into equities.
On the foreign exchange markets, the dollar firmed against
the higher yielding euro as traders bought the U.S. currency as
as an alternative to riskier assets.
A stronger dollar typically weighs on gold, but the two
assets' usual relationship has broken down in recent months as
both respond to risk aversion.
Analysts say falling prices have also curbed the amount of
scrap gold returning to the market in the last few days. A flood
of scrap supply early in 2009 was a key factor pressuring gold
down from its high above $1,000 an ounce.
According to metals consultancy GFMS, which released its
2009 Gold Report on Tuesday, scrap supply outweighed jewellery
offtake in the first quarter of this year.
RISING
Gold buying in the world's biggest jewellery market, India,
has eased after firming last week as prices slipped. Jewellery
demand was hit hard last year by rising prices.
European demand is also ebbing after a brief recovery.
"What we saw earlier in the week as far as physical demand
was concerned below the $880 level is a little bit quieter this
morning," said MKS Finance' head of trading Afshin Nabavi.
"There is not as much enthusiasm."
"But by the same token, there is not really any major
selling as such," he added.
Investor demand was steady, with holdings on Tuesday of the
world's largest gold-backed exchange-traded fund, the SPDR Gold
Trust <GLD>, a fraction below the recent 1,127.44 tonnes record.
[]
Pradeep Unni, an analyst at Richcomm Global Services, said
equity weakness, investment demand and strong Indian buying
ahead of the wedding season and Akshaya Tritiya, the most
auspicious day to buy gold, on April 27, should support prices.
"If gold manages to hold above $880 in the near term, expect
it to rise to $901-$904... with a possibility of rising towards
$920," he said.
Among other precious metals, spot platinum <XPT=> eased to
$1,151.50/1,161.50 an ounce from $1,162. The metal recovered in
the first quarter after tumbling by two-thirds last year from
the all-time of $2,290 an ounce it reached in March last year.
Investors see the metal as good value now prices have
dropped, analysts say, while there are hopes that car demand may
recover if the economic downturn bottoms out. The metal is
chiefly used as a component in catalytic converters.
Spot silver <XAG=> firmed to $12.28/12.35 an ounce from
$12.22, while spot palladium <XPD=> was at $224/228 an ounce
from $222.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
