* Rise in German industrial output weighs on dollar
* Equities rally could sap bullion interest
* ETF holdings drop to lowest since early 2009
* Coming up: U.S. wholesale inventory data Thursday
(Adds market details, updates prices)
By Frank Tang and Clara Denina
NEW YORK/LONDON, May 8 (Reuters) - Gold was up over 1
percent on Wednesday, rising for the first time in three
sessions as a drop in the dollar and strong physical bullion
buying helped offset pressure from a continued decline in
gold-backed exchange-traded fund holdings.
The precious metal and industrial commodities were supported
by dollar's sharp fall against the euro. An unexpected rise in
German industrial output pared back prospects of a near-term
interest rate cut in the euro zone.
Hopes of surging demand from China in coming months, after
net gold inflows from Hong Kong hit a record in March, might
further support bullion prices, which have been hurt by sagging
investor confidence this year, analysts said.
"Indian physical demand is also strong and the combined
response by consumers and retail investors to the plunge in
prices since mid-April is absorbing a portion of the liquidation
in the gold-exchange traded funds," said James Steel, chief
precious metals analyst at HSBC.
Spot gold rose to $1,471.16 by 3:29 p.m. EDT (1929
GMT), up 1.3 percent, its biggest one-day percentage increase in
nearly two weeks.
Bullion fell over 1 percent in the previous session as the
equity markets rallied.
U.S. Comex gold futures for June delivery settled up
$24.90 at $1,473.70 an ounce, with trading volume about 20
percent below its 30-day average, preliminary Reuters data
showed.
Analysts said, however, U.S. equities' rallies will likely
pressure gold's safe-haven appeal. On Wednesday, the S&P 500
index reversed early losses and was set to end at another
intraday record high.
"Given the reduction of tail-risk in Europe, the rising
labor market in the U.S. and the low inflation rate, investors
prefer equities to gold in the near term," bullion broker Sharps
Pixley said in a note.
ETF OUTFLOWS CONTINUE
Holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, fell 0.42 percent to 1,057.79
tonnes, the lowest since early 2009.
Spot gold was down more than 12 percent so far this year
after posting annual gains in the past 12 years as easy monetary
policy prompted investors to buy bullion.
The physical market remained tight given a recent surge in
demand for gold bars, coins and nuggets, but some analysts said
volumes had come off slightly after a recent rush in Asian
countries.
UBS said in a note that its index of India physical flows
continued to suggest demand that is well above average.
In other precious metals, silver eased 0.1 percent to
$23.86 an ounce. Platinum rose 1.3 percent to $1,496.24
an ounce, while palladium was up 2.1 percent at 692.46.
3:29 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold JUN 1473.70 24.90 1.7 1446.70 1475.80 144,661
US Silver JUL 23.927 0.121 0.5 23.640 24.095 34,136
US Plat JUL 1504.90 23.70 1.6 1480.80 1509.00 7,541
US Pall JUN 698.25 17.65 2.6 681.15 699.40 3,199
Gold 1471.16 19.17 1.3 1448.28 1476.36
Silver 23.860 -0.030 -0.1 23.700 24.070
Platinum 1496.24 18.74 1.3 1483.00 1506.50
Palladium 692.46 13.96 2.1 683.00 696.50
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 178,471 222,388 177,610 19.99 -0.22
US Silver 37,222 78,557 55,035 27.95 1.18
US Platinum 7,718 13,266 11,888 19.68 0.25
US Palladium 4,098 5,188 5,041
(Additional reporting by Lewa Pardomuan in Singapore; Editing
by Jane Baird, Andre Grenon and Bob Burgdorfer)
