/www.fxserver.com/ LONDON, April 9 - Gold gained in European trading on Wednesday, lifted by a weaker dollar and falling stock markets as investors looked beyond the war in Iraq to the outlook for the global economy.
By 0842 GMT spot gold was quoted at $323.70/324.20 an ounce, up from $322.00/322.50 at the New York close on Tuesday and above this week's four-month low of $318.75.
"The price action over the past few days confirms our view that the long-liquidation sell-off in gold has come to an end," said John Reade, metals analyst at UBS Warburg.
"In the near term the metal will continue to take its direction from currencies and equity markets but once attention moves from war to economic performance we expect gold to find renewed interest," Reade said.
Other safe-haven assets such as government debt and bonds also gained on anxiety about the economic outlook.
"Strength in the euro has continued overnight, pushing gold back up to $324 after the yellow metal closed in New York at $322.40...$320-328 is likely to offer a wide trading range for the moment," said James Moore, metals analyst at TheBullionDesk.com.
Bullion prices would remain volatile as the war in Iraq continued.
A U.S. military spokesman in Qatar said on Wednesday it was too early to talk of the battle for Baghdad and the war to overthrow Iraqi President Saddam Hussein being over.
Captain Frank Thorp told at Central Command forward headquarters in Qatar that half of Iraq north of Baghdad had not been occupied by U.S.-led forces. That included Saddam's home city of Tikrit, 175 km (110 miles) north of the capital, where U.S. officials have said resistance could be stiff.
ADDED SUPPORT FOR GOLD
Despite the gains, gold would struggle to return to 6-1/2 year highs of $388.50 posted in February in the lead up to U.S.-led military action against Iraq.
Bullion was set or "fixed" in the London morning session at $324.10 an ounce, up from the previous fix of $323.40.
The metal was also supported by evidence that leading gold producers continued to reduce the amount of gold they sold -- or hedged -- in forward markets last year.
Gold hedging worldwide fell 14 percent to 81 million ounces in 2002, a joint tally by industry consultants Gold Fields Minerals Services (GFMS) and Investec said.
GFMS labelled the decline over 2001 as "staggering" and a key factor in supporting gold prices above $300 an ounce.
Hedging -- the selling of yet-unmined nuggets forward at fixed prices -- is a popular tactic among gold miners to lock in revenue and thwart cyclical downturns in bullion prices. But in a rising market, miners run the risk of being forced to sell their gold below current value.
Critics of hedging say the practice erects a price ceiling on bullion prices.
In other precious metals, silver was quoted at $4.48/50 an ounce, up from $4.47/49 an ounce on the back of fund buying.
Platinum was quoted at $624/629 from $621/626.
"This was the result of tightness of supply in the platinum market, exacerbated by fund short covering. Palladium continues to be trapped in the same trajectory of low demand, which has been pushing the price lower since the end of March," said Barclays Capital in a report.