* Dollar touches fresh 3-week high versus the euro
* ETF Securities reports 2 pct rise in gold ETF holdings
* Platinum, palladium rise to multi-week highs
(Updates prices, adds detail, comment)
By Jan Harvey
LONDON, Jan 6 (Reuters) - Gold fell more than 2 percent on
Tuesday as a stronger dollar dented the precious metal's appeal
as a currency hedge, but the platinum group metals rallied as
investors hunted for bargains.
Spot gold <XAU=> was quoted at $846.50/848.10 an ounce at
1444 GMT, down from $858.90 late in New York on Monday. However,
it lifted off an earlier low of $838.55 as the dollar trimmed
gains against the euro after a raft of U.S. data at 1500 GMT.
U.S. gold futures for February delivery <GCG9> on the COMEX
division of the New York Mercantile Exchange were down $10.10 at
$847.70.
VM Group analyst Matthew Turner said investors were looking
to the currency markets for direction. "A lot of news on
physical demand has been quite poor, and that might also be
weighing on prices," he added.
The U.S. currency rose against the euro after a flash
estimate of euro zone inflation data came in weaker than
expected, increasing pressure on the European Central Bank to
cut interest rates. []
Analysts said the prospect of an ECB rate cut at the bank's
next interest rate meeting on Jan. 15 was pressuring the single
currency, and consequently gold. []
A firm dollar reduces gold's appeal as an alternative
investment. However, the U.S. currency trimmed gains versus the
euro after data showed U.S factory orders and pending home sales
dropped by more than expected in November. []
DEMAND FIRM FROM FUNDS
But while the stronger dollar and reports of lacklustre
jewellery sales weighed on prices, demand for the metal from
exchange-traded funds -- which issue securities backed by stocks
of physical gold -- remains firm.
ETF Securities, which operates Europe's largest gold-backed
ETF, said holdings of its Physical Gold exchange-traded
commodity <PHAU.L> rose 2 percent in the week to January 2 to
1.899 million ounces. []
Holdings of the world's largest bullion ETF, the SPDR Gold
Trust <GLD>, held at a record 780.23 tonnes on Monday.
"Gold is holding (where it is) because of investment demand
for gold ETFs, rather than demand from the physical side or as a
hedge against the U.S. dollar," said Commerzbank analyst Eugen
Weinberg.
Firmer oil prices, which are holding just below $50 a barrel
as supply fears were fuelled by Israel's incursion into Gaza and
a dispute between Russia and Ukraine over natural gas, also lent
some support to gold. []
Among other precious metals, platinum and palladium rallied
to multi-week highs, shrugging off a spate of poor vehicle sales
news from carmakers, the major consumers of the metals.
Spot palladium <XPD=> was the main riser, climbing 8 percent
to a six-week high of $198.50. The metal was later quoted at
$194.50/199.50, against $183.50 late in New York on Monday.
Platinum also climbed more than 2 percent to $967.50, its
highest level for three months. It was later at $958.50/963.50
an ounce against $946.
"With the commodities basket, people are shifting out of
gold and into other commodities that have been underperforming
lately," said Commerzbank trader Rory McVeigh. "And palladium is
probably the biggest underperformer of the market."
Spot silver <XAG=> eased to $11.11/11.19 an ounce from
$11.22.
(Editing by James Jukwey)
