* Dollar weakens versus the euro, supporting gold
* China monetary tightening pressures commodities, stocks
* SPDR gold ETF reports further outflow on Tuesday
(Updates prices, adds comment)
By Jan Harvey
LONDON, Jan 13 (Reuters) - Gold rose in Europe on Wednesday
as the dollar weakened versus the euro, helping the precious
metal recover some of the previous day's 2 percent loss, with
physical demand emerging to support prices at the lows.
Gold dropped along with most commodities on Tuesday after
China's decision to raise its banks' reserve requirements
sparked fears spending will be curtailed. The dollar initially
rose on the move, though it has since retreated versus the euro.
Spot gold <XAU=> was bid at $1,132.25 an ounce at 1412 GMT,
against $1,127.95 late in New York on Tuesday. U.S. gold futures
for February delivery <GCG0> on the COMEX division of the New
York Mercantile Exchange firmed $3.20 to $1,132.60 an ounce.
"This morning and last night, there were quite a few
physical buyers bargain hunting around in the marketplace, and
we saw some good demand out of India and elsewhere," said Afshin
Nabavi, head of trading at MKS Finance.
"With the dollar back on the slide, there is more interest,"
he added. "I wouldn't be surprised if we pushed near to the high
end of the range again, which is around $1,145-50."
The euro hit a one-month high against the dollar on
Wednesday while higher-yielding currencies trimmed the previous
day's losses as investors concluded China's surprise monetary
tightening would not derail growth. []
Strength in the U.S. unit curbs gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies.
China's move may be a precursor to an interest rate rise,
analysts said, which would hurt gold as a non-interest bearing
asset.
"Bullion never behaves well in a rising interest rate
environment across the globe," VTB Capital said in a note.
COMMODITIES PRESSURED
Among other commodities, oil prices fell to their lowest
this year after an industry report showed rising U.S. distillate
stocks, despite the cold snap that has brought snow and ice to
the northern hemisphere. []
Gold tends to track crude prices, as the metal can be bought
as a hedge against oil-led inflation.
Equities recovered after early losses on the China news,
with European shares edging higher. [] U.S. stock futures
rose on Wednesday. []
Holdings of the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust <GLD>, dipped another 3.7 tonnes on
Tuesday, bringing their decline so far this year to nearly 18
tonnes, or 1.6 percent. []
Silver <XAG=> tracked gold higher to $18.39 an ounce from
$18.24. Platinum <XPT=> was at $1,570.50 an ounce against
$1,568.50, and palladium <XPD=> was at $420 against $421.50.
U.S. platinum and palladium exchange-traded funds launched
last Friday were met with buying interest, with about 170,000
ounces of metals added in the first two trading sessions, a
spokesman for ETF Securities, which operates the funds, said.
"Continued strong ETF investment in 2010 (potentially
amplified by the U.S. ETFs) would push the platinum and
palladium markets into deficit," RBS Global Banking & Markets
said in a note.
"This underpins our longer-term bullish outlook on the PGMs,
our top pick being palladium."
(Editing by Sue Thomas)
