* Gold holds gains as Middle East tensions boost oil
* Oil off early high, but Mid-East worries underpin prices
* Dollar slips broadly on grim U.S. economic outlook
(Updates with New York prices, comment, changes
byline/dateline from LONDON)
By Carole Vaporean
NEW YORK, Dec 29 (Reuters) - Gold maintained its strength
on Monday, tracking a climb in crude oil prices amid renewed
tensions in the Middle East, but it retreated from early highs
as oil prices gave up some ground.
Broad weakness in the dollar also supported gold. A slide
in the pound sterling to a record low versus the euro helped
take the precious metal to a new all-time high when priced in
British pounds, according to Reuters data.
Spot gold <XAU=> reached a session high of $889.55 an
ounce, its strongest level since Oct. 10, but was off the highs
at $877.55/880.55, up from $866.80 late in New York on Friday.
In sterling terms, gold hit an all-time high of 605.07
pounds an ounce, up from 592.40 pounds on Friday. U.S. gold
futures for February delivery <GCG9> climbed $4.10 to $875.30.
"The dollar and crude directed the market, with early
strength in crude and the weak dollar pushing the market up
hard early, along with the events in Gaza Strip," said Stephen
Platt, an analyst at Archer Financials in Chicago.
Later in the session, some players used price gains as a
profit-taking opportunity, once oil trimmed its gains.
"We backed off those highs in recognition that that
situation has not changed. And crude backed off its highs and
the dollar rallied up from its lows, which led to some profit
taking from that early strength," said Platt.
Israeli aircraft destroyed a bastion of Hamas rule over
Gaza on Monday, the third day of an offensive that has killed
more than 300 Palestinians in the deadliest violence in the
territory. []
"Gold is reflecting geopolitical tensions. The other
precious metals are tracking gold at the moment, and the oil
market," said Deutsche Bank trader Michael Blumenroth.
Geopolitical tensions increase interest in bullion as a
safe-haven investment and are also a prime factor driving up
oil prices, which also influence gold.
Oil rose nearly 10 percent to a high of $42.20 a barrel as
Middle East violence served as a reminder that political
tensions could threaten crude supplies. They later slipped back
below $40 a barrel, limited by economic troubles. []
"Further geopolitical tension should inflate the risk
premium in current precious metal prices, which should
translate into increased upside potential in the near term --
barring any significant decline in financial market systemic
risk," Standard Bank analyst Manqoba Madinane said.
The dollar, the other main external driver of gold,
weakened against the euro, helping to lift bullion prices. A
softer dollar typically supports gold, which is often bought as
an alternative investment to the U.S. currency.
The dollar fell broadly on Monday as a grim outlook for the
U.S. economy weighed. []
SILVER GAINS
Among other precious metals, silver <XAG=> tracked gold
higher to a two-week high of $11.23 an ounce from $10.64 late
on Friday. By late in New York's session silver trimmed its
early rise to $10.75/10.85 an ounce.
Investment demand for silver-backed exchange-traded funds
remains strong.
The world's largest silver-backed ETF, the iShares Silver
Trust <SLV.A>, said its bullion holdings rose more than 30
tonnes, or 0.5 percent, on Friday to their highest level since
late October. []
The New York-based trust has recorded an inflow of more
than 106 tonnes of silver since the beginning of December.
Platinum group metals also climbed. Platinum touched a
session high of $931 an ounce, its strongest in 10 weeks, and
held most of those gains onto late New York business at
$915.50/920.50 an ounce, against $888.50 on Friday.
"The white metal should benefit from further bargain hunter
interest in coming sessions, with chart resistance pegged at
$938/44/74," James Moore, an analyst at TheBullionDesk.com,
said. "However, the metal still remains overshadowed by slowing
auto demand and shifting market fundamentals."
Fears over falling demand from the car industry, which
accounts for around half of global platinum consumption, has
knocked platinum down by as much as two-thirds from the
all-time high of $2,290 an ounce it reached in March.
Spot palladium <XPD=> rallied nearly 7 percent to a session
high of $186.50, lifted by gains in other precious metals and
in oil. It was quoted at $185/190 an ounce in late Monday trade
in New York, up from $174.50 on Friday.
(Additional reporting by Jan Harvey in London; Editing by
Walter Bagley)
