* Risk appetite weighs on dollar, boosting gold
* Traders report physical demand is trickling back
* Platinum, palladium reach highest in over a year
(Releads, updates prices)
By Jan Harvey
LONDON, Jan 5 (Reuters) - Gold prices were firm in Europe on
Tuesday, having touched near three-week highs earlier in the
session, as the dollar languished versus the euro after data
showed a steep drop in U.S. pending home sales for November.
Platinum and palladium steadied after rising to their
highest in well over a year in earlier trade on expectations the
economic recovery will lift demand and anticipation new
exchange-traded products will be launched in the United States.
Spot gold <XAU=> was bid at $1,124.95 an ounce at 1520 GMT,
against $1,121.00 late in New York on Monday. Earlier it touched
a high of $1,127.70 an ounce.
Standard Chartered analyst Daniel Smith said he was cautious
on the outlook for the metal. "Our view is that the dollar will
be more rangebound than it was late last year, and that will
make any upward rallies in gold difficult to sustain," he said.
The dollar extended losses against the yen and slipped
versus the euro on Tuesday after the home sales data. The U.S.
currency earlier slipped across the board as investors poured
fresh funds into riskier assets at the start of the year. []
Weakness in the U.S. unit boosts gold's appeal as an
alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies.
Oil also steadied after earlier rising towards $82 a barrel.
Gold tends to track crude prices, as the metal can be bought as
a hedge against oil-led inflation. []
On the physical market, gold buying in India, the world's
biggest bullion consumer in 2008, continued for a second day on
Tuesday as a strong rupee made the metal cheaper for domestic
traders, dealers said. []
"There is a little bit of buying interest as the rupee is in
support," said a dealer with a state-run bank in Mumbai.
DEMAND RETURNS
Analysts say there are signs that physical demand is
returning as buyers become acclimatised to higher prices.
"Reports indicate that jewellery demand is picking up at these
levels," said Fairfax analyst John Meyer in a note.
New York's SPDR Gold Trust <GLD> reported sales on the first
trading session of 2010, and its holdings dropped nearly 5
tonnes on Monday from the previous business day. []
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange rose $7.50 to
$1,125.80 an ounce.
Silver was at $17.66 an ounce, against $17.55 late on
Monday. Earlier it hit a peak of $17.72 an ounce, their highest
since mid-December.
Platinum <XPT=> hit a 16-month high of $1,528 before
retreating to $1,523 an ounce against $1,521, while palladium
<XPD=> reached its strongest level since July 2008 at $424 and
later retreated to $419.50 against $418.00.
Investors are favouring the metals, used mainly in
autocatalyst manufacturing, partly due to perceptions that a
recovery in economic growth will lift car demand.
Traders will be scrutinising U.S. auto sales data due later
in the session for signs of a recovery.
Many also hope the launch of U.S.-listed ETPs backed by
platinum and palladium will open the metals up to a new wave of
investment.
ETF Securities said late on Monday that a financial firm had
bought 100,000 shares of its proposed U.S. platinum ETP, and
delivery is scheduled by the end of the week. []
(Editing by James Jukwey)
