Gold retreats as equities recover some ground after rout

By Jan Harvey

LONDON (Reuters) - Gold edged lower on Thursday after posting its biggest one-day gain in two weeks in the previous session, as a tentative rebound in European equities dampened some risk aversion.

European shares rose 0.8 percent, shrugging off a weak session in Asia overnight, though remained near multi-year lows after a volatile two days that has wiped trillions of dollars off global markets.

Also feeding into better sentiment, oil prices edged off early lows after falling to their weakest since 2003 this week on persistent concerns about a supply overhang. [O/R]

Spot gold was down 0.1 percent at $1,099.30 an ounce at 1300 GMT, while U.S. gold futures for February delivery were down $6.50 an ounce at $1,099.70.

"You're not seeing so much safe haven bidding, although that is probably supporting the market," Societe Generale analyst Robin Bhar said.

"As the price inches higher, you're just losing steam from the physical markets. The physical buying is maybe not there to mop up any excesses, and for the moment gold appears to be struggling."

Physical gold demand in Asia slowed this week as prices rose, curbing seasonal buying in China ahead of a big holiday and forcing sellers in India to offer a discount.

Gold rose to two-month highs this week as investors sought alternative assets after stocks and industrial commodities, especially oil, fell sharply on fears of a global slowdown.

Gold has repeatedly struggled to maintain a push above $1,100 an ounce, however, as the threat of further U.S. interest rate increases and a stronger dollar suggest scope for gains is limited. It has also hit resistance at its 100-day moving average at $1,107.

Traders were awaiting the outcome of a European Central Bank meeting later on Thursday. The bank is expected to keep interest rates on hold, even as market turmoil, tumbling bank stocks and ebbing inflation set the stage for action later in the year.

Expectations of a steady-as-she-goes message kept the euro strong against the dollar ahead of the bank's January decision and statement.

"Although we do not expect the ECB to already take any further significant expansionary measures ... ECB President Draghi could nonetheless raise the prospect of further steps to be taken at subsequent meetings," Commerzbank said in a note. "This should benefit gold in euros above all."

Among other precious metals, platinum was up 0.3 percent at $820.40 an ounce, after earlier falling to a 7-year low at $807.89. Palladium was up 0.6 percent at $495.85 an ounce and silver was down 0.5 percent at $14.08.

(Additional reporting by Manolo Serapio Jr. in Manila, editing by David Evans and Katharine Houreld)