* Equities, euro retreat as risk aversion resurfaces
* Sovereign risk fears still lend support to gold
* Gold:silver ratio lifts after hitting lowest since May
(Updates prices)
By Jan Harvey
LONDON, June 22 (Reuters) - Gold edged up in Europe on
Tuesday as bargain hunters stepped in and risk aversion returned
to the wider markets, solidifying expectations that gold's
appeal as a refuge from risk will persist.
Spot gold <XAU=> was bid at $1,239.70 an ounce at 13.38 GMT,
against $1,231.65 late in New York on Monday. U.S. gold futures
for August delivery <GCQ0> edged up $0.20 an ounce to $1,241.00.
"After yesterday's sell off people thought it's worth buying
on the dip. Obviously with equity markets under pressure people
are more risk averse and that's supporting gold," said Standard
Bank analyst Walter de Wet.
"We still think the bias is for gold to move higher in the
next couple of weeks. It's the usual stuff, Europe's overhanging
debt... Also, as long as U.S. rates remain low the carry cost of
holding gold is low so that should support."
European shares ended a near two-week winning run on
Tuesday, led lower by banks after Fitch Ratings' downgrade of
BNP Paribas <BNPP.PA> revived concerns over the health of the
banking sector. []
China's decision to allow the yuan to rise against the
dollar prompted a rally in risk-related assets, including
industrial commodities, on Monday.
But this rally ran out of steam on Tuesday, with oil prices
slipping below $77 and industrial metals like copper, aluminium
and nickel all declining. [] []
The dollar gained for the second straight day against the
euro as new concerns about the funding needs of European banks
offset stronger-than-expected German economic data. []
"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.
Commerzbank analyst Eugen Weinberg said at a presentation at
the bank's London offices on Tuesday that he expected gold to
rise to new highs at 1,300 an ounce in the fourth quarter after
correcting during the summer months.
"If you look only at mine supply, if you look only at
jewellery demand, you will come to the conclusion that gold is
vastly overvalued," he said. "But we consider gold not as a
commodity, but as an insurance policy (against) risk in the
market."
"People are getting more risk averse, and they are looking
for safe havens. They are finding that in gold," he added.
Among other precious metals, silver <XAG=> was bid at $18.62
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 $1,585.50 an ounce against
$1,587, while palladium <XPD=> was at $488 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.
[]
(Editing by James Jukwey)
