* China hikes bank reserve requirements by 50 basis points
* Euro rises after firm Spanish, Portuguese bond sales
* Gold:silver ratio rises to highest since mid-December
(Updates prices, adds comment)
By Jan Harvey
LONDON, Jan 14 (Reuters) - Gold fell in Europe on Friday
after China's central bank raised lenders' reserve requirements,
with softer haven demand for the metal after solid bond sales by
Portugal and Spain also weighing on prices.
The metal pared losses as the dollar surrendered ground to
the euro after U.S. data showed a below-consensus rise in retail
sales last month, but struggled to gain traction. []
Spot gold <XAU=> was bid at $1,361.59 an ounce at 1351 GMT,
against $1,372.75 late in New York on Thursday, having earlier
hit a low of $1,360.00. U.S. gold futures for February delivery
<GCG1> fell $25.90 an ounce to $1,361.10.
Gold prices rallied above $1,390 an ounce on Thursday, its
highest this year, before turning lower to drop nearly 1 percent
on the day. It has since retreated further.
"The rally we saw yesterday apparently drew out a few
nervous longs who had been waiting for an opportunity to scale
back positions," said Ole Hansen, senior manager at Saxo Bank.
"It looks like attention (for now) has turned to other markets
like stocks and cyclicals."
"The overall scenario has not changed but it looks like we
are settling in for a bit of range trading here -- $1,350/1,400
gold and $28/30 on silver," he added.
"Stops are probably building up below those two levels, so
they will be critical in the days ahead."
Gold dropped after China's central bank raised lenders'
required reserves for the fourth time in just over two months on
Friday, making good on its vow that inflation fighting will be a
top priority for the year. []
Gold is sometimes seen as a hedge against rising inflation,
and also benefits widely from a low interest rate environment.
Additional factors are also pressuring gold, analysts said.
"China's move of course has consequences for the gold
market, but it is not (just) China that is playing a role," said
Peter Fertig, a consultant at Quantitative Commodity Research.
"After yesterday's ECB conference the market is also concerned
that the ECB might hike rates earlier than previously assumed."
EURO FACES SHORT-TERM PRESSURES
The European Central Bank said on Thursday that the euro
zone faces short-term price pressures which may linger, showing
it could raise interest rates to contain inflation even while
the bloc is gripped by a debt crisis. []
"Also bond auctions for Portugal, Spain and Italy went well,
credit default swaps are declining, and spreads over German
bunds are falling, which indicates there is less reason to be
concerned about the euro zone debt crisis," Fertig added.
"Investors are moving again out of safe havens into more
risky assets, which also weighs on gold," he said.
Worries over certain euro zone countries' debt levels can
work two ways for gold, lifting prices as investors choose gold
as a haven from risk, but weighing on them via the pressure they
exert on the euro.
Traders in Asia reported strong physical gold buying,
particularly from China, on Friday, but large bullion-backed
exchange-traded funds continued to see outflows.
Holdings of the world's largest gold ETF, New York's SPDR
Gold Trust <GLD>, fell by more than 6 tonnes on Thursday and are
down more than 15 tonnes so far this year. []
Among other precious metals, spot silver <XAG=> was bid at
$28.39 an ounce against $28.67.
The gold:silver ratio -- the number of ounces of silver
needed to buy an ounce of gold -- rose to a one-month high on
Friday at just below 48, showing that silver, as is typical, is
underperforming gold in a falling market.
Platinum <XPT=> was at $1,801.74 an ounce against $1,799.99,
while palladium <XPD=> was at $788.22 against $803.75.
(Editing by Sue Thomas)
