* Dollar wilts vs euro, currency basket on Bernanke comments
* Oil prices recover, rise back above $74/bbl
* Chinese November car sales almost double
(Updates, adds comment, changes dateline from TOKYO)
By Jan Harvey
LONDON, Dec 8 (Reuters) - Gold rose 0.5 percent in Europe on
Tuesday after comments by Federal Reserve Chairman Ben Bernanke
on the U.S. economic outlook curbed the dollar's recovery,
boosting interest in the precious metal as an alternative asset.
Investors have been attracted back into gold after the metal
posted a three-session decline, analysts said.
Spot gold <XAU=> was bid at $1,163.30 an ounce at 1019 GMT,
against $1,156.90 late in New York on Monday. In that session it
fell to a two-week low of $1,135.80, having touched a record
$1,226.10 on Dec. 3.
Commerzbank analyst Eugen Weinberg said lower prices were
attracting investors back to gold. "We have seen this buying on
dips in the last few weeks, which is a sign of strength," he
said. "Stronger hands are taking the place of weaker hands."
However, the metal remains vulnerable to a turnaround in the
dollar, he added.
"Should the dollar strengthen in the coming days, it would
be very difficult for gold prices to hold at current levels,
because it would take one of the most important arguments (for
buying gold) away from the market," he said.
The dollar struggled against the euro on Tuesday after
comments from Bernanke cooled speculation of an early rise in
U.S. interest rates. []
Bernanke said the U.S. economy still faced headwinds and
unemployment could stay high for some time, playing down the
impact of Friday's better-than-expected payrolls report, which
boosted the dollar and sent gold sharply lower. []
Other commodity prices also picked up, with oil rising back
above $74 a barrel. Gold tends to track crude prices, as the
metal can be bought as a hedge against oil-led inflation.
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange edged up 70 cents
to $1,164.70 an ounce.
BUYING SPECULATION
Gold prices rallied sharply in November amid speculation
that more central banks -- especially that of China -- may try
to boost their gold reserves, after the Reserve Bank of India
bought 200 tonnes of bullion from the IMF.
An official Chinese newspaper said on Tuesday China should
increase the proportion of gold in its foreign exchange reserves
to ensure the safety of its overall portfolio. []
Expectations for further central bank diversification into
gold is supporting investment in the metal, analysts said, and
the recent price dip may encourage this.
"Now the real test comes for the sustainability of
investment demand for the precious metal, though we believe that
sentiment remains bullish in the long run," said VTB Capital
analyst Andrey Kryuchenkov in a note.
"It is a very healthy correction, cementing a good base for
further growth in 2010, while some investors will use it as a
good opportunity to buy on the dips."
Among other precious metals, silver <XAG=> was bid at $18.25
an ounce against $18.16, platinum <XPT=> at $1,453 an ounce
against $1,438.50 and palladium <XPD=> at $376 against $371.
Traders in autocatalyst materials platinum and palladium are
looking for fresh signs of recovery in the beleaguered
automotive market for clues as to the future strength of demand.
Official data on Tuesday showed China's passenger cars sales
in November jumped 98.23 percent from a year earlier, paving the
way for roughly 50 percent growth in 2009 thanks to government
stimulus measures to aid consumption. []
Germany's BMW <BMWG.DE> said it expects the recent trend in
vehicle sales growth that started in September to continue this
month after the group's retail volumes increased by 11.5 percent
in November to 107,686 vehicles. []
(Editing by James Jukwey)
