* Gold steadies, but seen vulnerable to falling investment
* Physical buying picks up in India after price drop
* Coming up: U.S. Fed's Beige Book, 1800 GMT
(Updates with comment, prices)
By Amanda Cooper and Jan Harvey
LONDON, July 28 (Reuters) - Gold held near $1,160 an ounce
in Europe on Wednesday, steadying after hitting three-month lows
the day before, helped by a degree of investor nervousness over
the U.S. economy and by strong demand from top consumer India.
As a lot of the fear surrounding the euro zone debt crisis
recedes and recent upbeat earnings allay some concern about the
outlook for the global economy, gold is likely to encounter more
weakness, especially after breaking key technical barriers.
Spot gold <XAU=> was bid at $1,158.75 an ounce at 1408 GMT,
against $1,159.65 late in New York on Tuesday. U.S. gold futures
for August delivery <GCQ0> fell $0.20 an ounce to $1,157.70.
Prices fell nearly 2 percent on Tuesday as selling of
commodities in the wake of weak U.S. consumer confidence data
pushed the metal through key technical support levels.
"For now, the metal looks very bearish technically and to be
honest, all these moves since yesterday are heavily technically
driven," said Standard Bank analyst Walter de Wet.
"I think it is going to fall more, but longer term, we still
see the bull market intact. Underlying, the same issues that
have pushed gold higher still remain," he added.
After the release of the European bank stress tests, a lot
of investor unease over the resilience of the European banking
system has subsided, but patchy U.S. data has fed concern that
growth in the world's largest economy could falter.
U.S. stocks opened lower after an unexpected fall in durable
goods orders in June and Boeing Co <BA.N> delivered a profit
outlook that fell below Wall Street's consensus forecast. []
Commerzbank analyst Daniel Briesemann said despite the
metal's slight recovery this morning, diversification into other
assets, seasonal demand weakness and a tendency towards
liquidation of long positions are all still pressuring prices.
"There has been a massive increase in risk appetite among
market participants," Briesemann said.
"We see money shifting away from safe haven assets like gold
to riskier assets like equities and oil."
European banking shares <.SX7P> were one of the main gainers
on the European stock market, rallying after strong corporate
earnings and after the new Basel III capital rules proved less
stringent. []
Coming up later in the day is the U.S. Federal Reserve's
"Beige Book," which offers anecdotal evidence of the strength of
the economy in each of the central bank's districts.
TECHNICALLY BEARISH
From a technical perspective, gold prices are looking
vulnerable after breaking through support in the $1,175-1,180 an
ounce area, analysts said.
"Taking a closer look at the price action from the
June 21 highs (near) $1,265, the decline can best be described
as corrective... with downside targets seen to the 200 day
average, now $1,147," said Barclays Capital in a note.
It said a decline to near $1,114 was likely to be the worst
case scenario. "Into here, we look for renewed signs of basing
before a return to trend," it added.
While the risk of further losses remains, analysts said gold
should be supported by re-emergent physical demand at lower
prices. Traders in India, the world's biggest gold consumer,
said buying was picking up as the metal became more affordable.
[]
UBS also said in a note that its gold sales to India on
Tuesday matched the second highest this year.
"Indian and physical demand from wider hubs has helped to
provide a price floor in July," the Swiss bank said.
"UBS sales to India in July are five times greater than June
and with the expectation that physical demand will persist until
the end of the month, July will post the best month for Indian
physical demand this year," it added.
A Reuters poll of 19 analysts and traders showed Indian spot
gold prices are expected to recover to 18,050 rupees per 10
grams by the end of this quarter. Prices hit a 10-week low near
17,700 rupees earlier on Wednesday. []
Among other precious metals, spot silver <XAG=> was at
$17.40 an ounce against $17.61, spot platinum <XPT=> was at
$1,530.55 an ounce against $1,527.15, and spot palladium <XPD=>
was at $465.50 versus $464.85.
(Editing by Alison Birrane)
