* Gold surrenders gains on dollar drop, strong euro data
* Safe-haven appeal up as Ukraine inches closer to war
* Platinum strikes grind on in South Africa
* Coming up: U.S. productivity data on Wednesday (Updates market activities)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, May 6 (Reuters) - Gold prices eased on Tuesday, surrendering early gains as weak physical demand made investors wary about the outlook, though tensions in Ukraine and weakness in the U.S. dollar and Wall Street stocks lent support.
Bullion initially rose as the dollar fell against the euro following strong surveys of service-sector purchasing managers in Spain and Italy.
The metal, however, turned lower after the Commerce Department said U.S. trade deficit narrowed in March as exports rebounded, but the improvement was probably not enough to prevent the government from revising down its estimate of first-quarter growth to show a contraction.
Gold prices were underpinned by worries of increasing violence as Ukraine slides further towards war, with supporters of Russia and of a united Ukraine accusing each other of tearing the country apart.
“As long as we see geopolitical tensions, that’s going to provide support for gold. In other words, I don’t see it falling precipitously,” said Mike Meyer, assistant vice president at EverBank World markets in St. Louis.
Spot gold was down 0.2 percent at $1,307.51 an ounce by 3:43 p.m. EDT (1943 GMT).
U.S. COMEX gold futures for June delivery settled down 70 cents an ounce at $1,308.60, with trading volume about 10 percent below its 30-day average, preliminary Reuters data showed.
The metal bounced back above the key chart level of $1,300 an ounce late last week as escalating tensions in Ukraine outweighed the impact of strong U.S. jobs data, but it has struggling to maintain those gains, however.
“Physical demand seems to be somewhat muted. We’ve seen significant ETF outflows in the last couple of weeks and muted coin sales in the United States,” said Commerzbank analyst Daniel Briesemann.
Outflows from the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, totalled nearly 10 tonnes last week.
Demand in Asia was soft overnight, precious metals house MKS said in a note, with Japan, Hong Kong and South Korea all absent for public holidays.
Among other precious metals, silver rose for a third session after hitting its lowest since early January last week at $18.82 an ounce.
Silver inched down 0.1 percent to $19.52 an ounce.
Platinum group metals outperformed on supply worries, with platinum rising 0.4 percent to $1,449.74 an ounce and palladium up 0.1 percent at $814.75 an ounce.
The world’s No. 2 platinum producer Impala Platinum said on Tuesday that if a 15-week strike continued at its South African operations, it would have to cut supply to clients to 40 percent of demand over the next 3 to 4 months.
South Africa’s Association of Mineworkers and Construction Union on Monday rejected the latest wage offer by the world’s three biggest platinum mining companies, who said the workers were afraid to accept the companies’ latest wage offer because of “threats to their personal safety.”
3:43 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL US Gold JUN 1308.60 -0.70 -0.1 1304.40 1314.30 98,340 US Silver MAY 19.598 0.078 0.4 19.475 19.605 33 US Plat JUL 1458.10 9.70 0.7 1447.10 1459.60 9,068 US Pall JUN 818.40 1.90 0.2 812.25 822.00 2,967 Gold 1307.51 -1.99 -0.2 1305.00 1314.10 Silver 19.520 -0.010 -0.1 19.500 19.690 Platinum 1449.74 5.49 0.4 1446.50 1456.00 Palladium 814.75 1.15 0.1 814.00 819.50 TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 116,223 129,805 179,852 14.9 -0.52 US Silver 31,322 64,360 55,946 23.25 0.24 US Platinum 9,436 8,878 12,428 16.29 1.04 US Palladium 3,417 5,764 5,687 25.68 0.56 (Additional reporting by Jan Harvey in London; Editing by Susan Thomas, Jane Baird and Marguerita Choy)