* 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 fell more than 1 pct on
Thursday as a drop in oil prices sparked 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,
sending 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. []
"A dollar rebound plus weaker crude prices triggered some
small-scale profit taking," said Andrey Kryuchenkov, an analyst
at VTB Capital. "Libya is priced in, (and the) correlation with
oil is still strong."
While the outbreak of violence in the Middle East and North
Africa is expected to underpin gold, fresh gains will depend on
unrest spreading. "Gold should continue in a wide range below
record highs unless violence in the MENA region escalates," said
Kryuchenkov.
Spot gold <XAU=> slipped as low as $1,410.56 an ounce and
was bid at $1,412.30 an ounce at 1509 GMT against $1,428.79 late
on Wednesday. It fixed at $1,413.25 at 1500 GMT. U.S. gold
futures for April delivery <GCJ1> fell $17.70 to $1,411.90.
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.
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.
MOODY'S TARGETS 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."
Among other precious metals, silver <XAG=> fell to $34.94 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 $1,765.99 an ounce against $1,796.49,
while palladium <XPD=> was at $761.97 against $776.97.
(Reporting by Jan Harvey; Editing by Jason Neely)
