Gold dropped slightly on Thursday to track a falling euro, but strong investment demand was likely to support prices, with ETF holdings hitting another record as fears about a worsening global recession lingered. The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust , said it held arecord 805.96 tonnes of gold as of Jan. 21, up 3.06 tonnes from802.90 tonnes on Jan. 20. [GOL/SPDR] Gold was trading at $851.95 an ounce, down $2.10 from New York's notional close on Wednesday, but was within sight of a two-week high of $865.80 hit on Tuesday. ETF holdings have gone up around 4 percent in the past month on a combination of worries over economic growth and the falling interest rate environment, but dealers said bullion may lack strength to revisit $900, a level last seen in October. "We are not building a trend here, we've just got a reaction to a difficult situation. I can't really say that gold is leading a commodities spike higher," said Darren Heathcote of Investec Australia in Sydney. "It just happens to be benefiting from a reaction to a very difficult market elsewhere. We can't say we're going to break $900 and stay there, but it's possible that we'll break it. From one day to the next, the market is very, very fickle." Gold rallied to a two-month high of $931 in early October but then dropped to a 13-month low around $680 in the same month after declines in stock markets forced investors to cash in to cover losses. Trading was also choppy in January, with prices falling to a one-month low around $801 last week, before bargain hunting pushed up prices. Bullion was below a record high of $1,030.80 hit last March. The euro slipped to $1.2975 amid anxiety about global banking woes, with the pounds also resuming falls against the dollar towards 23-year lows after a government rescue package for struggling British banks failed to reassure investors. [USD/] In Asia, China's economic growth slumped to 6.8 percent last quarter, dragging down the pace of expansion for all of 2008 to a seven-year low of 9.0 percent as the full forMce of the global financial crisis struck home. [ID:nPEK340437] "Given the current performance of the stock markets, I think investors shift some of their money to precious metals. Funds have driven up prices but it's not necessarily the fundamentals," said a dealer in Hong Kong. "Gold may try the highs but if it fails to sustain the gains, then we will see a very sharp reversal," he said. Asia shares clung to small gains, with investors reassured after bank shares fuelled a Wall Street rally, but with global economic gloom still pervasive, safe-haven trades such as the yen and U.S. Treasuries also rose. [MKTS/GLOB] The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> was up 0.7 percent, while Japan's Nikkei average <.N225> hit a two-month low. Oil was steady around $44 a barrel. Platinum was trading at $930.00 an ounce, up $6.50 from New York's notional close. New York gold futures added $2.9 an ounce to $853.0 in electronic trade. Precious metals prices at 0258 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 851.95 -2.10 -0.25 2.31 Spot Silver 11.27 -0.04 -0.35 -23.70 Spot Platinum 930.00 6.50 +0.70 -38.82 Spot Palladium 181.50 -2.00 -1.09 -50.68 TOCOM Gold 2460.00 8.00 +0.33 -19.61 16140 TOCOM Platinum 2689.00 5.00 +0.19 -49.63 4711 TOCOM Silver 320.50 1.70 +0.53 -40.76 81 TOCOM Palladium 535.00 7.00 +1.33 -60.40 38 Euro/Dollar 1.3010 Dollar/Yen 89.12 TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce. (Editing by Clarence Fernandez)

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