* Equities, euro retreat as risk aversion resurfaces
* Sovereign risk fears lend support to gold
* U.S. data, BNP Paribas downgrade in focus
(Updates throughout, refreshes prices)
By Jan Harvey
LONDON, June 22 (Reuters) - Gold rose in Europe on Tuesday,
buoyed by a fresh wave of investor unease after a ratings
downgrade of a French bank undermined equities and more volatile
assets.
Spot gold <XAU=> was bid at $1,240.95 an ounce at 1440 GMT,
against $1,231.65 in New York late on Monday, when it staged its
worst one-day fall in about a month. U.S. gold futures for
August delivery <GCQ0> edged up $1.30 an ounce to $1,242.00.
"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."
U.S. data showed a surprise decline in existing home sales
in May, increasing concerns about the resilience of the world's
largest economy and further enhancing the appeal of gold as a
refuge against broader economic risk.
European shares ended a near two-week winning streak on
Tuesday after Fitch Ratings' downgraded BNP Paribas <BNPP.PA>,
renewing concerns over the health of the banking sector and
hitting bank shares. []
China's decision to allow the yuan to rise against the
dollar had prompted a rally in risk-related assets, including
industrial commodities, on Monday.
But this rally ran out of steam by Tuesday, with oil prices
slipping below $77 and industrial metals including copper,
aluminium and nickel 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.
DATA EYED
In addition to the existing home sales data, the Richmond
Fed services index also declined sharply.
U.S. Treasury Secretary Tim Geithner said the government's
TARP bailout package was projected to raise federal deficits by
$105 billion, although costs for the emergency bank bailout plan
launched during the financial crisis continued to fall.
[]
In the longer term, gold is likely to be supported by 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 he expected gold to rise to
new highs at $1,300 an ounce in the fourth quarter after
correcting lower during the summer.
"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 $18.92
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 $1,586.50 an ounce against
$1,587, while palladium <XPD=> was at $484.50 against $490. The
auto-catalyst 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 Jane Baird)
