* Investors to play catch-up, allocations to gold still small -UBS
* ECB keeps money taps open, drops reference to rate cuts
* Market awaits ex-FBI director's testimony to Congress
(Adds quote on palladium, updates prices) LONDON, June 8 (Reuters) - Gold slipped on Thursday after the euro lost ground against the dollar and as investors awaited the outcome of Britain's national election and testimony from former U.S. FBI director James Comey.
The euro declined after the European Central Bank cut
its forecasts for inflation and said that policymakers had not discussed scaling back its massive bond-buying program.
A weaker euro versus the dollar erodes the buying power of euro zone investors for gold, which is priced in the U.S. currency.
Spot gold was down 0.9 percent at $1,275.06 an ounce at 1355 GMT. U.S. gold futures for August delivery shed
1.2 percent to $1,277.40. Investors were awaiting British election results and Comey's testimony, which will turn the spotlight on a clash between him and U.S. President Donald Trump. Those and other uncertainties are providing support to gold, which is likely to resume its rally eventually, even if its correction lower extends in the short term, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. "It's quite natural that we see markets taper off some of the recent gains," he said. "The sentiment on the market at the moment is that gold is a 'buy on dips'. The question is whether we'll see a dip of any size once there's more clarity following today's events." Hansen advised buying if gold declined to key short-term support at $1,265. UBS strategist Joni Teves agreed that a growing list of global uncertainties along with macro forces are expected to push gold higher, so any dips would be an opportunity to build or add to positions. "We think that investor allocations to gold remain small compared with other assets. An extension of gold's gains up ahead raises the risk that many would have to play catch-up," she said in a note.
In other precious metals, palladium climbed 1.9
percent to $849.75 an ounce. In the previous session it hit its highest in nearly three years but shed its early gains to end 2.3 percent lower. Commerzbank technical analyst Karen Jones advised bullish investors to be wary of the palladium market. "It will shortly encounter the 16-year resistance line at $867/68 and, with a 13 count on the daily chart, we would tighten up stops (on long positions) considerably," she said in a note.
Platinum fell 0.9 percent to $933.24 while silver
lost 1 percent to $17.37.
(Additional reporting by Vijaykumar Vedala and Koustav Samanta in Bengaluru; Editing by David Evans and David Goodman)