* Gold little changed as dollar, oil steady
* Largest gold ETF sees 12.27 tonne inflow Jun 17
* Platinum firm as Eskom gets go-ahead for tariff raise
(Recasts, updates prices, adds comment, changes dateline -
pvs SINGAPORE)
By Jan Harvey
LONDON, June 18 (Reuters) - Gold was little changed in
Europe on Wednesday as oil prices flattened and currency markets
stabilised, with traders looking to the dollar to set fresh
direction for the precious metal.
Gold XAU= was trading at $883.30/884.30 an ounce at 1022
GMT from $884.20/885.40 late in New York on Tuesday, when the
metal reversed early losses and firmed on a weaker dollar.
The dollar steadied against the euro Wednesday after recent
speculation over interest rates, but remained on the defensive
as hopes for a hike in U.S. rates eased after a spate of poor
economic data. [ID:nL18607473]
"We have faced some volatility (in the currency markets) in
the last couple of weeks and that has definitely impacted the
gold price," said Frederic Panizzutti, a senior vice president
at MKS Finance. "Now we are consolidating around these levels."
"Any indication of short or medium term direction is going
to come from the currencies, and possibly from the energy
markets," he said.
Gold tends to track crude prices, both because it is bought
as a hedge against inflation and because it is often traded in a
basket of commodities, of which oil can be the most heavily
weighted.
The precious metal benefited as crude soared to a new
all-time high of $139.89 earlier this week.
Traders will be eyeing stock data due from the U.S. later
Wednesday, which can cause sharp fluctuations in the oil price
[ID:nSP56607], and the outcome of a meeting of oil producers and
consumers in Jeddah this weekend.
A run-up in oil prices could lend further support to gold,
which remains firmly supported by fears over inflation as energy
and food prices continue to surge.
"There is a bit of a lack of confidence in the market, but
again we do see pockets of strong demand from those who are
worried about inflation," said TheBullionDesk.com analyst James
Moore.
"Oil is going to be the one to watch, especially as we go
into the peak demand summer months," he added.
In an inflationary environment, and if the dollar fails to
gain traction against the euro, gold prices could return to
$1,000 an ounce this year, according to analysts.
Demand from institutional investors appears resilient.
The world's largest gold exchange traded fund, StreetTRACKS
Gold Shares, reported that it saw a 2 percent or 12.27 tonnes
inflow on Tuesday, bringing its total holdings to 617.48 tonnes,
their highest level since April 22.
Gold ETFs issue securities backed by physical stocks of the
precious metal which can be traded on exchanges, allowing
investors to gain exposure to metals prices without holding the
metal itself.
The growth of their holdings has represented a key source of
demand for gold since the launch of the first precious metals
ETF in 2003.
Gold jewellery buying is lacklustre, however, with buyers
put off by the high and volatile prices of recent months. The
summer months are typically a sluggish time for gold.
In India, the world's biggest market for gold, buyers are
waiting for prices to fall before making purchases.
Jewellery demand is likely to pick up if prices fall closer
to 12,000 rupees from their current level of 13,000 rupees, a
dealer in a large private bank in India said. [ID:nBOM53971]
Among other precious metals, platinum was firm as regulators
allowed South African power utility Eskom to raise its
electricity tariffs by an additional 13.3 percent year-on-year
for 2008/2009.
The tariff increase amounts to a 27.5 percent average raise
year-on-year, the regulator said.
A power shortage in the republic, source of 80 percent of
the world's platinum, has supported the white metal since the
beginning of the year.
The market is now worried that electricity shortages will
get worse over the South African winter, especially if costs are
pushed up. [ID:nL13464444]
"Threat of miners strike next month to protest against
rationing of electricity and rising power costs has prompted
fears of worsening shortages driving up prices," said Fairfax
analyst John Meyer in a note.
Spot platinum XPT= rose to $2,071.50/2,091.50 an ounce
from $2,052.00/2,072.00 late in New York.
Spot palladium XPD= rose to $458.00/466.00 an ounce from
$456.50/464.50. It hit a high of $464 an ounce, matching the
level hit on Tuesday, its strongest since mid-April.
Silver XAG= was steady at $17.03/17.08 an ounce from
$17.05/17.13 late in New York.
(Reporting by Jan Harvey: Editing by Peter Blackburn)
