* Retreat in oil prices sparks profit-taking in gold
* Libya unrest, concerns over euro zone underpin prices
* iShares silver ETF says holdings rise to record high
(Updates prices)
By Jan Harvey
LONDON, March 10 (Reuters) - Gold retreated in Europe on
Thursday as a drop in oil prices sparked some profit-taking, but
worries over euro zone debt after a Moody's downgrade of Spain
and ongoing unrest in Libya kept the metal firmly underpinned.
Oil's rise to 2-1/2 year highs late last month fuelled fears
that soaring energy costs could damage the economic recovery,
knocking stock markets lower and supporting interest in
perceived safe-havens like Treasuries, the Swiss franc and gold.
Falling crude prices and gains in the dollar are prompting
some investors to cash in gains after last week's rally to a
record $1,444.40. Oil fell by more than $1 as the dollar index
rallied amid fresh worries about the euro zone's recovery. []
"It particularly seems to happen that when gold hits new
highs, there is a chunk of profit taking, and it does lose
momentum, but that doesn't mean we are not going to regain new
highs," said Societe Generale analyst David Wilson.
"Just the fact that we are going to increasingly see more
signs of inflationary pressures globally should be supportive
for gold," he said.
Spot gold <XAU=> was bid at $1,419.25 an ounce at 1222 GMT,
against $1,428.79 late in New York on Wednesday. U.S. gold
futures for April delivery <GCJ1> fell $10.20 to $1,419.40.
Prices remained firmly underpinned by ongoing violence in
Libya. Observers are worried the unrest that began in Egypt and
Tunisia earlier this year could continue to spread across North
Africa and the Middle East.
NATO and the European Union begin talks on Thursday on a
possible "no-fly" zone over Libya after some of the fiercest
fighting of the three-week-old uprising against leader Muammar
Gaddafi. []
Libyan tanks fired on rebel positions around the oil port of
Ras Lanuf and warplanes hit another oil hub further east on
Thursday as Muammar Gaddafi carried counter-attacks deeper into
the insurgent heartland.
MOODY'S CUTS SPAIN
Also supporting gold was a re-emergence of concerns over
euro zone sovereign risk after rating agency Moody's cut its
ratings on Spain and Greece, and ahead of a summit of euro zone
leaders on Friday. []
A group of 17 euro zone leaders will meet to take the next
cautious steps in their year-long effort to quell the region's
debt crisis, though the meeting is unlikely to produce a
breakthrough.
"Many clients are becoming increasingly wary about the
European debt situation, and more rather than fewer believe that
markets will be disappointed by the European meetings this
month," said UBS in a note.
"There is growing acceptance that Europe's debt crisis will
get worse before it gets better, as our fixed income strategists
maintain, and that this will be gold-positive."
Asian buyers were reluctant to make significant fresh
purchases as prices held near record highs, with buying in
Singapore well below pre-Lunar New Year levels. []
"It doesn't make sense for physical buyers to buy now," said
a Hong Kong-based dealer, "They will probably buy on dips when
prices go back towards $1,400 or below. Only investors with a
very long-term view would buy at this point."
Asia is by far the largest consumer gold market in the
world, with China and India accounting for the largest chunk of
gold demand and Vietnam, Thailand and India also buying
significant quantities of gold.
Among other precious metals, silver <XAG=> fell to $35.21 an
ounce from $36.05, tracking gold. The iShares Silver Trust
<SLV>, the world's largest silver exchange-traded fund, said its
holdings hit a record high at 10,974.06 tonnes on March 9.
Platinum <XPT=> was at $1,777.74 an ounce against $1,796.49,
while palladium <XPD=> was at $763.22 against $776.97.
(Reporting by Jan Harvey; Editing by Alison Birrane)
