* Equities, euro retreat as risk aversion resurfaces
* Sovereign risk fears still lending support to gold
* Gold:silver ratio lifts after hitting lowest since May
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, June 22 (Reuters) - Gold firmed in Europe on Tuesday
as lower prices tempted investors back to the market, amid
expectations demand for the metal as a haven from risk will
support prices in the medium term.
Spot gold <XAU=> was bid at $1,236.90 an ounce at 0911 GMT,
against $1,231.65 late in New York on Monday. U.S. gold futures
for August delivery <GCQ0> eased $2.70 an ounce to $1,238.
"This is a rebound after the sell-off last night," said VTB
Capital analyst Andrey Kryuchenkov. "We should consolidate here.
The uptrend is still intact."
He said in the medium term, gold was supported by haven
buying and uncertainty escalated by the latest euro zone debt
crisis, as well as a slowdown in the U.S. economic recovery.
"Improving sentiment and a lower dollar would also support
gold in the short term, though to a lesser extent," he added.
European shares slipped following a weak session in Asia, as
wary investors took profits from a rally ignited by China's
decision at the weekend to unpeg its currency from the dollar,
allowing more flexibility in its foreign exchange rate. []
The rise in other commodities after China's move also ran
out of steam on Tuesday, with oil prices slipping 0.8 percent
and industrial metals like copper, aluminium and nickel all
declining. [] []
The euro retreated from a one-month high against the dollar
on Tuesday, tracking a pullback in the yuan a day after China
pledged to allow its currency to trade more freely. []
"For the dollar, the central issue still feels like the
performance of the equity market and while we have seen a good
bounce in stock market sentiment, there is still... nervousness
over its durability," said Credit Agricole in a note.
"The pull-back overnight has already seen the dollar index
bounce sharply off its low. Existing home sales today should
paint a happy picture... and this could be enough to propel risk
appetite higher," it added.
DATA EYED
In addition to those numbers at 1400 GMT, the markets are
also awaiting the release of the Richmond Fed manufacturing and
services indexes, and the testimony of U.S. Treasury Secretary
Tim Geithner on the government's TARP bailout package.
Longer term, gold is likely to be supported by lingering
fears over sovereign risk, particularly in the euro zone.
According to UBS, a majority of delegates at the bank's
recent Reserve Management Seminar for Sovereign Institutions
said they believe sovereign risk default is the chief risk to
the global economy over the next 12 months.
"We contend that so long as fears about global debt
sustainability and sovereign risk remain heightened, gold will
continue to rise," said UBS analyst Edel Tully in a note.
Among other precious metals, silver <XAG=> was bid at $18.75
an ounce against $18.70.
The gold:silver ratio, which shows the number of ounces of
silver needed to buy an ounce of gold, edged up to 66 after
hitting its lowest since late May in the previous session.
Elsewhere platinum <XPT=> was at $1,589 an ounce against
$1,587, while palladium <XPD=> was at $489 against $490. The
autocatalyst metals are being supported by expectations for a
recovery in demand from carmakers.
Volkswagen's <VOWG_p.DE> Audi unit <NSUG.DE> signalled it
was set to sell more than 1 million cars this year as the
premium automaker rides a wave of growth in China.
[]
(Reporting by Jan Harvey; Editing by Keiron Henderson)
