UPDATE 5-Gold retreats on demand fears as dlr pares losses

* Dollar pares losses versus the euro

* Traders await ECB rate decision for fresh direction * Platinum, palladium steady ahead of U.S. car sales data

(Updates prices, adds comment)

By Jan Harvey

LONDON, Nov 3 (Reuters) - Gold retreated from highs on Monday as the dollar recovered from lows against the euro, with fears over physical demand weighing on sentiment.

Spot gold XAU= climbed to $725.35/727.35 an ounce at 1409 GMT from $723.05 late in New York on Friday.

"This is due to a combination of the usual daily gold drivers -- crude oil and the euro-dollar exchange rate -- and also the weakness of physical gold demand in India," said Dresdner Kleinwort consultant Peter Fertig.

The dollar was pressured in early trade by a return in risk appetite, after recording its biggest monthly gain in more than 17 years in October. However, it lifted from lows against the euro in early afternoon on Monday in Europe. [ID:nSP121319]

Traders will be keeping a close eye on a raft of interest rate decisions due later in the week for clues to the next direction of the gold market.

The European Central Bank is due to announce its decision on euro zone interest rates -- expected to be a 50 basis point cut -- on Thursday, while the Bank of England and the Reserve Bank of Australia are also expected to announce cuts this week.

Traders will also be watching gold's other main external driver, the crude oil market. Prices were softer on Monday, with U.S. crude futures dipping nearly $2 a barrel as investors focused on slowing energy demand. [ID:nSYD368172]

Weaker crude prices tend to pressure gold, which benefits from interest in the metal as a hedge against inflation.

Physical demand for the metal also remains muted as price volatility spooks investors. Gold imports to India, the world's biggest bullion market, fell 27 percent in October year on year, the Bombay Bullion Association said. [ID:nBOM214404]

Gold imports to Turkey, a key Middle Eastern market, also tumbled to just 1 tonne from 29.7 tonnes in September, as the firmer dollar curbed buying. [ID:nL3695516]

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