* Gold recovers after slide below $1,200/oz
* European stocks give up gains
* Goldman Sachs (N:GS) recommends shorting gold
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Feb 16 (Reuters) - Gold rose on Tuesday, snapping
two days of losses and recovering from an early dive below
$1,200 an ounce as stock markets swung lower, boosting interest
in the metal as a haven from risk
Spot gold XAU= was up 0.2 percent at $1,211.68 an ounce by
1045 GMT, having earlier fallen as low as $1,190.40. It shed 2.3
percent on Monday, its biggest one-day loss since mid-July.
Prices reversed that move on Tuesday after European stocks
shed earlier gains to turn 0.3 percent lower, shrugging off a
positive session in Asia overnight. MKTS/GLOB
Gold hit a one-year high of $1,260.60 last week as worries
over the global economy prompted heavy selling of assets seen as
higher risk, such as stocks and cyclical commodities.
Heightened stock market volatility and fears that a slowdown
in China could spill into the wider markets has led investors to
cut the number of interest rate increases they expect from the
U.S. Federal Reserve this year.
The prospect of higher U.S. rates was a key factor driving
gold prices down 10 percent last year.
"It's really all about confidence here - confidence in the
Fed, confidence in the PBOC, confidence in the ability of
financial markets generally to withstand the kind of stress that
they're under," said ICBC Standard Bank analyst Tom Kendall.
"To get gold to make sustainable gains above $1,250 and up
towards $1,300, you do need that sense of fear and concern more
widely to be sustained, and for assets like equities to come
under even more stress."
A correction lower in gold prices had been expected after
they rose quickly over a short period of time. The metal has
gained $200 from its January lows, with last week being its best
since 2011.
Goldman Sachs's recommendation to short gold, prompted by
the bank's belief that the recent fear-induced rally has been
overdone, fed into more cautious sentiment for the metal.
"Fears around China, oil and negative interest rates have
likely been overstated in the gold price and other financial
markets," it said in a Monday-dated note.
U.S. gold futures GCv1 for April delivery were down 2.1
percent from late on Friday at $1,213.20. U.S. markets were
closed on Monday for Presidents' Day.
Among other precious metals, silver XAG= was flat at
$15.34 an ounce, while platinum XPT= rose by 0.1 percent to
$933.56 and palladium XPD= fell 0.3 percent to $508.94.
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