European shares gain for third consecutive session… Euro up against dollar, yen as risk aversion ebbs …  SPDR Gold Trust ETF, iShares silver ETF at record

Gold slipped on Wednesday as investors cashed in profits after the precious metal hit a three-month high earlier this week, with a recovery in stock markets indicating the beginnings of a revival in risk appetite.

Spot gold was quoted at $892.10/894.10 an ounce at 1510 GMT, down from $897.35 late on Tuesday. U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange dipped $6.80 to $892.70 an ounce.

Gold has been well supported by investors’ fears over systemic risk and the outlook for the economy, which sent the metal to a three-month high on Monday. But signs are emerging that this risk aversion is ebbing, prompting some profit taking.

“Technically, the daily charts are overbought and warrant profit taking after a relentless rally over the fag-end of last week,” said Pradeep Unni, senior analyst at Richcomm Global Services.

Moves in the dollar versus the euro, which usually push gold in the opposite direction, are currently being trumped by the perception of risk.

The euro rose against the dollar on Wednesday as risk aversion cooled, pressuring gold, while investors awaited the end of a meeting of Federal Reserve rate setters.

While headline interest rates are unlikely to change from their current level of zero to 0.25 percent, investors will be looking for further news on U.S. quantitative easing and details of a proposed “bad bank” to take over toxic banking assets.

European shares also ticked up for the third consecutive day, with banks leading the market higher.

U.S. stock futures also rose on optimism the new Obama administration will move quickly to stabilize the ailing banking sector.

“In the last days the gold price was moving higher despite the stronger dollar,” Eugen Weinberg, an analyst at Commerzbank, said. “The risk aversion of the market participants was playing a huge role.”

“Right now, the European equity markets — another indicator of risk aversion — are friendlier and are showing some recovery. In this case, you are not looking for a safe haven.”

Oil prices, typically another key external driver of gold, were steady at just below $42 a barrel.

Fears over the outlook for the economy and growing systemic risk are currently playing a greater role in the direction of gold than its usual drivers, oil and currencies, analysts said.

SPDR SOARS

The 7 percent rise in the SPDR Gold Trust’s bullion holdings this year is widely attributed to safe haven buying.

The trust, an exchange-traded fund which issues securities backed by physical stocks of bullion, has seen interest soar as investors seek out physical gold.

However, jewelery demand remains depressed as prices hold near $900 an ounce, particularly in key global centres such as India, China and the Middle East.

“Jewelers are not comfortable buying at such high prices,” said Harshad Ajmera, proprietor of Kolkata bullion dealer JJ Gold House.

Among other precious metals, silver prices were little changed at $12.02/12.08 an ounce from $12.01.

The iShares Silver Trust , the world’s biggest silver-backed ETF, said its bullion holdings rose more than 110 tonnes on Tuesday to a record 7,453.15 tonnes, and are up more than 300 tonnes in the first two days of the week.

“What we tend to see between gold and silver prices is that initially people will opt for gold as a safe-haven asset, but if gold prices rally too far, the cheaper option is to buy silver instead,” said Barclays Capital analyst Suki Cooper.

Platinum and palladium firmed a touch. Spot platinum was at $950/958 an ounce against $945, while spot palladium was at $189/194 from $188.50.

A Reuters precious metals survey of 56 analysts showed most believe platinum prices will remain depressed this year as an expected small supply dip fails to balance falling demand from major consumers carmakers.

LONDON, Jan 28 (Reuters)