Wires

PRECIOUS-Gold dips 1% on bets for global measures to soften virus blow

Sumita Layek

(Updates prices, adds comments and details)

* European shares gain, Dollar firms

* Japan unveils $4 bln economic package

* SPDR Gold holdings rise to highest since October 2016

March 10 (Reuters) - Gold fell over 1% on Tuesday, pulling back from the key $1,700 level hit in the last session, as risk sentiment improved and the dollar firmed on expectations for global support measures to soften the economic impact from the coronavirus epidemic.

Spot gold lost 1.2% to $1,659.95 per ounce by 0959 GMT. U.S. gold futures fell 0.9% to $1,660.

"It's the stabilisation in financial markets; we see gains in stock markets, yields are edging up, dollar is up. So, factors which had supported gold in the last few days are now turning negative for it," said Peter Fertig, an analyst at Quantitative Commodity Research.

Stimulus hopes and recovering crude oil prices are also leading to the recovery of risky assets and the move out of the safe havens, Fertig added.

Bullion rose as much as 1.7% on Monday to its highest since December 2012 at $1,702.56, after a rout in global equity markets on fears surrounding the coronavirus and a crash in crude prices triggered by a price war between top producers Saudi Arabia and Russia.

U.S. President Donald Trump said he would take "major" steps to gird the economy, while Japan unveiled a second package of measures worth about $4 billion to cope with the fallout of the virus outbreak.

European shares rose and bond yields increased from record lows on stimulus hopes, while the dollar firmed against rivals.

However, investors remained cautious as total global infections touched 111,600 by Monday.

Apart from the virus-led uncertainty, global implications of the oil price war would also support gold in the near term, said FXTM market analyst Han Tan.

"I wouldn't be surprised if gold makes another run for $1,700 ... triggered by further signs of the outbreak worsening or as we get confirmation in hard data that major economies are wilting under the weight of this outbreak."

Investors are now focused on a European Central Bank policy meeting on Thursday where it is expected to follow the U.S. Federal Reserve and ease interest rates. Markets are also expecting another cut at the Fed's March 18 meeting.

Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to 30.99 million ounces, its highest since October 2016.

Palladium fell 1.4% to $2,455.29 per ounce. Silver gained 0.4% to $17.04, while platinum rose 1.3% to $873.86.

(Reporting by Sumita Layek in Bengaluru, editing by Ed Osmond)