* ETF holdings at record above 850 tonnes
* China's gold production hits record 282 tonnes
(Recasts, updates throughout, adds comment)
By Jan Harvey
LONDON, Feb 3 (Reuters) - Gold steadied in Europe on Tuesday
as safe-haven buying of assets such as bullion-backed
exchange-traded funds arrested the previous session's near 3
percent slide.
The precious metal managed to lift from lows despite
strength in the dollar versus the euro, typically a major
influence on gold. []
At 1223 GMT, gold <XAU=> was quoted at $904.40/905.30 an
ounce, little changed from $903.15 late in New York on Monday.
Earlier it touched a low of $894.30.
"Gold is a barometer for fear on the markets," Commerzbank
analyst Eugen Weinberg said.
"If the equity markets are down, if sentiment is becoming
more cautious and people are worried about the health of the
financial system, gold prices will rise despite the U.S.
dollar."
Interest in smaller investment products such as gold coins
and bars and physically-backed exchange-traded funds (ETF) has
grown as rising volatility in other asset prices boosts
bullion's appeal as a safe store of value.
European shares slipped on Tuesday after earlier gains as
oil major BP's <BP.L> weaker than expected results dragged down
prices []. U.S. stock futures are expected to open higher as
investors brace for a flurry of corporate results.
[]
STEADY
Oil prices also steadied after sliding almost 4 percent on
Monday. []
Bullion prices fell $25 an ounce in that session as
investors took profits after the previous week's more than 3
percent rally, and hurt by fears over weak jewellery demand in
key centres such as India and the Middle East.
However, demand for gold as a haven from risk has limited
losses.
The world's largest gold-backed ETF, the SPDR Gold Trust,
said holdings rose 9.78 tonnes to a record 853.37 tonnes as of
Feb 2, up more than 9 percent in the past month. []
"When U.S. ETF investors are adding to holdings it often
shows up as gold rallying as the equity market opens, as happened
yesterday," UBS strategist John Reade said in a note.
"In our view, rapidly growing ETF holdings are a clear sign
of safe haven buying of gold," he added. "This is the dominant
factor in the gold market at present."
However gold's underlying fundamentals are weak, Weinberg
said, with China, the world's largest gold producer, and Russia
both reporting rising production while jewellery demand is soft.
China's production hit a record 282 tonnes in 2008, the
China Gold Association said, up 4.3 percent from 2007.
[]
High prices are scaring off jewellery buyers, who account
for almost 70 percent of global demand for gold. The volume of
gold jewellery sales in Abu Dhabi fell 70 percent in January due
to rising prices. []
"Basically, there's not much interest from the jewellery
sector and there's profit taking as well as light selling in
Asia," a dealer in Hong Kong said.
"But we can still see bargain hunting at lower levels.
That's why we also see a rebound, which is driven by bargain
hunters," the dealer said, referring to a fall to an intraday
low of $895.60 an ounce.
Among other precious metals, spot silver <XAG=> was at
$12.33/12.41 an ounce, against $12.37 late on Monday.
Interest in silver-backed ETFs is also strong, with the
holdings of the largest, iShares Silver Trust <SLV.A>, at record
levels.
Platinum <XPT=> was last trading at $963/971 from $970.00
while palladium <XPD=> was at $193.50/197.50 from $193.50.
Investors are awaiting U.S. car sales data later in the
session for direction. Falling demand for platinum and palladium
from carmakers, the major consumers of the metals, has put
significant pressure on prices over the last year.
(Reporting by Jan Harvey; Editing by Sue Thomas)
