* Euro hits fresh two-month lows on Europe debt crisis
* Portugal rejects report of euro zone pressure for bailout
(Updates, changes dateline from SINGAPORE)
By Elizabeth Fullerton
LONDON, Nov 26 (Reuters) - Gold fell 1 percent on Friday as
the dollar pushed to fresh two-month highs against the euro on
worries that Ireland's debt crisis was spreading and growing
speculation of an imminent Portuguese bailout.
However, gold was underpinned by some modest safe haven
buying amid investor nervousness over the European debt crisis
after a newspaper report that euro zone nations were pressuring
Portugal to follow Ireland's lead and seek a bailout.
Portugal and Germany's finance ministry denied the report.
Spot gold <XAU=> was trading at $1,359.50 an ounce by 1143
GMT from $1,374.12 late on Thursday, just off an intraday low of
$1,357.95. Gold futures <GCZO> were down 1 percent at $1,359.5
Trade was fairly thin as U.S. markets were closed for a
second day following the U.S. Thanksgiving holiday.
On a weekly basis, gold was headed for a 1.3 percent rise,
snapping two consecutive weeks of losses.
"Investors are eyeing a strengthening dollar and see no
reason to hold gold in a strengthening dollar environment," said
David Wilson, analyst at Societe Generale.
Gold's traditional inverse relation to the U.S. dollar broke
down in May this year when the euro zone's debt problems became
apparent, prompting investors to dump the single European
currency.
In euro terms <XAUEUR=R>, gold was trading moderately higher
at 1,031.47 euros an ounce compared with 1,028.76 euros late on
Thursday, having broken through the 1,000 euros mark on Monday
for the first time in a week.
"As Eurozone funding worries are not going to go away, it is
against the euro that gold should be gauged," UBS analyst Edel
Tully said in a report on Friday.
Noting that gold looked set for its first positive weekly
close since Nov. 5, she said: "We view this resilience as a sign
of gold starting to enjoy some safe-haven demand in response to
events in Europe."
The euro <EUR=> fell to a fresh two-month low of $1.3242
against a resurgent dollar <USD/> in early European trade, while
the Spanish/German 10-year bond yield rose to a euro-lifetime
high as the market focused on the likelihood of Ireland's debt
crisis spilling over to Spain and Portugal.
Sabre-rattling by North Korea following its shelling of the
South earlier this week added to an uncertain geopolitical
picture which could lend gold some support from more risk-averse
investors.
North Korea said on Friday that impending military exercises
by the South and the United States were pushing the region
towards war.
The rest of the precious metals complex was mixed on
Thursday. Silver <XAG=> fell to $27.14 from $27.54 late on
Thursday and platinum <XPT=> dipped to $1,641.74 an ounce
against $1,655.95 but palladium <XPD=> rose to $673.47 from
$695.23.
(Editing by Sue Thomas)
