* China lifts banks' reserve requirements once more
* Euro continues recovery vs. dollar but pares earlier gains
* Indian gold demand strong after prices dip from record
(Updates prices, adds comment)
By Jan Harvey
LONDON, Nov 19 (Reuters) - Gold turned lower on Friday,
surrendering gains in line with other commodities as markets
mulled the prospect of a Chinese rate hike, and as the euro
retreated from earlier highs against the dollar.
Spot gold <XAU=> was bid at $1,348.15 an ounce at 1340 GMT,
against $1,352.65 late in New York on Thursday, having earlier
risen as high as $1,362.79. U.S. gold futures for December
delivery <GCZ0> fell $5.20 to $1,347.80.
Gold prices have tracked moves in the wider commodity
markets closely in recent weeks. The precious metal was caught
up in heavy selling of oil and base metals earlier in the week,
but rebounded on Thursday and early on Friday as they recovered.
"Recently (the commodities) all seem to be moving together
-- that means, maybe, the more recent price action has been
fund-driven," said Jeremy East, global head of commodity
derivatives trading at Standard Chartered.
"These funds tend to have the same sort of trend-following
systems, so they all come in at the same time to put risk on,
and they come to the market at the same time to exit."
Oil turned lower and base metals slipped on Friday, both
shedding early gains, as news China was lifting banks' reserve
requirements refocused attention on the prospect of a rate hike
in the country, the world's biggest consumer of many metals.
China said it would raise banks' reserve requirements by 50
basis points from Nov. 29 on Friday. Commodity prices tumbled
earlier this week on fears the government would lift rates after
inflation hit a 25-month high in October. []
A recovery in the dollar from early lows against the euro
and a basket of currencies is also putting some pressure on
commodities. The dollar index recovered to 78.479 by early
afternoon from a low of 78.160 in earlier trade. []
Earlier it came under pressure as expectations that Ireland
was close to a deal to support its banks lifted the euro. A
European Union and IMF aid plan for Ireland is likely to come
next week, EU sources said on Friday. []
Gold typically trends in the opposite direction to the
dollar. Strength in the U.S. unit curbs gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies.
LONG-TERM POSITIVE
Expectations that the dollar will weaken once more is still
underpinning longer-term positive sentiment towards gold,
analysts said.
"With the Fed continuing to vouch for QE2, dollar weakness
will continue to persist, and along with that, a possible
solution to the Irish debt crisis has resulted in a firmer
euro," said Richcomm Global Services analyst Pradeep Unni.
"These two factors will continue to provide a bullish bias
to the metal in the near term. The only fear lingering around is
a potential rate hike from China, which, though (it) is almost
discounted, fails to dissipate completely.
On the physical side of the market, Asian buyers hunted
bargains after prices dropped from the record high levels hit
last week, with demand from top consumer India picking up due to
the ongoing wedding season. []
But demand for gold-backed exchange-traded funds continued
to be soft, with holdings of the world's largest gold ETF, the
SPDR Gold Trust <GLD.P>, declining 4.6 tonnes to a one-month low
of 1,286.299 tonnes on Thursday. []
Elsewhere silver <XAG=> was bid at $26.72 an ounce against
$26.92, while platinum <XPT=> was at $1,649.49 an ounce against
$1,662 and palladium <XPD=> was at $698.72 against $693.72.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the relative price performance of key
commodities this year, click on: http://r.reuters.com/baf29p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Jan Harvey; editing by Keiron Henderson)
