Sept. 7 (Bloomberg) -- Gold fluctuated in London on concern that European banks' holdings of government debt will hinder their fiscal health, increasing the precious metal's appeal as a protection of wealth. The euro declined against the dollar and European equities fell as an industry group said Germany's 10 largest lenders may need fresh capital to meet new regulations. European stress tests on banks understated some lenders' holdings of potentially risky debt, the Wall Street Journal reported. Gold is 1.3 percent below a record. UBS AG said gold-coin demand "picked up" yesterday. The latest news "suggests that the European debt crisis could again start to play a more decisive role in the price of gold," UBS analyst Edel Tully said today in a report. The bank's coin sales reached "greater volumes than we've seen for a while. It is the sentiment that small gold bar and coin demand represents that can add a significant premium to the gold price." Immediate-delivery bullion lost 95 cents, or 0.1 percent, to $1,249.10 an ounce at 9:48 a.m. in London. Prices swung between a gain of 0.1 percent and a loss of 0.3 percent. Gold for December delivery was little changed at $1,250.40 on the Comex in New York. Yesterday's transactions will be booked with today's for settlement purposes as there was no floor trading on Labor Day. Bullion is set for a 10th annual gain as investors seek a store of value against financial turmoil in Europe and the prospect of slowing economic growth. Gold reached a record $1,265.30 on June 21 amid investor concern that sovereign-debt levels in some European states were too high. The metal is up 14 percent this year. Government Debt German lenders, including Deustche Bank AG, need to raise about 105 billion euros ($134 billion) to reach an estimated 10 percent Tier 1 capital ratio, a key measure of financial strength, Dirk Jaeger, who is responsible for regulatory topics at the Association of German Banks, said yesterday. European stress tests of major banks understated some lenders' holdings of potentially risky government debt, the Wall Street Journal said, citing its own analysis. The European Union tested 91 lenders in July, giving 84 of them passing grades. The euro fell as much as 1 percent against the dollar. Gold usually moves inversely to the greenback. The Stoxx Europe 600 Index of shares fell as much as 0.7 percent. "Further European Union banking concerns have dampened stock sentiment," said James Moore, an analyst at TheBullionDesk.com in London. Gold is being supported "as investors turn toward safe-haven asset classes." Silver Slides Silver for immediate delivery in London fell 0.7 percent to $19.7075 an ounce. The metal reached $19.9438 yesterday, the highest price since March 2008. Silver "will be on its way to the $20.50 region once the $20 level has been surpassed on a daily closing basis," Axel Rudolph, a technical analyst at Commerzbank AG, said today in a report. "Further up is the major $21.25/40 resistance area, where the early and mid-March 2008 highs were made. This price zone has now become our medium-term upside target." Platinum gained as much as 0.4 percent to $1,567.35 an ounce, the highest price since Aug. 9, and was last down 0.5 percent at $1,552. Palladium slipped 0.9 percent to $523 an ounce. The metal yesterday reached $533.25, the highest level since May 14. --With reporting by Candice Zachariahs in Sydney and Ron Harui in Singapore. Editors: John Deane,

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