* Euro recovery, equity rise suggests easing risk aversion
* Dollar correlation continues to break down
(Updates throughout, changes dateline, pvs SYDNEY)
By Jan Harvey
LONDON, Jan 27 (Reuters) - Gold slipped more than 1 percent
in Europe on Tuesday as investors took profits after the last
session's gains, with a firmer euro versus the dollar and an
uptick in equity markets suggesting risk aversion is easing.
Spot gold <XAU=> dipped to a low of $891.60 an ounce, and
was quoted at $894.40/896.40 an ounce at 1026 GMT, against
$902.65 late in New York on Monday.
U.S. gold futures for February delivery <GCG9> on the COMEX
division of the New York Mercantile Exchange fell $12.60 an
ounce to $896.20.
Its usual close relationship with the dollar, weakness in
which typically benefits gold, has broken down, with both assets
slipping on Tuesday as risk aversion eased a touch.
"A stronger dollar implies panic about the economic outlook
but should mean a weaker gold price, in theory," said Daniel
Smith, an analyst at Standard Chartered.
"The fact that that (relationship) has broken down
highlights how worried people are about where they can put their
money and who they can trust."
The euro jumped on Tuesday after a surprise rise in German
corporate sentiment hinted companies there were less pessimistic
over the economic outlook than expected. []
Equity markets also edged higher in Europe as banks extended
the previous session's gains, suggesting risk aversion may be
softening. []
Gold climbed to its highest in three months on Monday,
hitting new peaks in sterling and euro terms, as investors
worried about the outlook for the financial system.
A Reuters survey of 52 analysts published on Monday showed
most expect gold to hold its ground in 2009 despite expected
falls in other asset prices, on worries over the global economic
outlook and turmoil in the financial markets. <PREC/POLL>
SAFE STORE
Investment in physically backed products such as
exchange-traded funds has been strong in recent weeks as
investors seek a safe store of value.
Holdings of New York's SPDR Gold Trust <GLD> inched up to a
new record for the sixth consecutive session on Monday, and have
climbed more than 52 tonnes since the beginning of the year.
London-based ETF Securities said its gold-backed ETFs saw
inflows of 420,000 ounces last week.
However, gold jewellery demand remains weak, dealers say,
and is likely to remain so in key global centres as prices rise.
"As the demand for jewellery is very sensitive to price
movements, demand for gold from India, Turkey and the Middle
East, the main centres of the gold jewellery industry, should
continue to weaken," said Commerzbank.
Oil climbed on expectations for OPEC supply cuts and a spate
of cold weather, but offered little support to gold. Traders are
awaiting U.S. stocks data later in the session. []
Among other precious metals, silver <XAG=> softened in line
with gold to $11.96/12.02 an ounce from $12.04 an ounce late on
Monday.
The Reuters survey showed most analysts polled expected
silver prices to fare better than those of the other industrial
precious metals platinum and palladium, as risk aversion boosts
interest in silver as a safe haven. []
The platinum group metals are also under pressure from
gold's slip. Both platinum and palladium suffered in recent
months from fears over falling demand from carmakers, who
account for around half of global consumption.
Japan's second-biggest carmaker Honda <7267.T> announced
further production cuts in North America and Japan as the
industry struggles in the downturn. []
Platinum <XPT=> edged down to $951.50/961.50 an ounce from
$959.59, while palladium <XPD=> eased to $187.50/192.50 an ounce
from $190.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
