* Euro continues recovery vs. dollar as Ireland package eyed
* China lifts bank reserve requirements, weighing on commods
* Indian gold demand strong after prices dip from record
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, Nov 19 (Reuters) - Gold prices steadied near $1,350
an ounce on Friday, shrugging off earlier losses, as
expectations that Ireland's banking crisis will shortly be
resolved lifted the euro versus the dollar.
However, persistent weakness in the wider commodity markets
as traders weigh up the prospect of a further rate hike from
China is keeping some pressure on gold, analysts said.
Spot gold <XAU=> was bid at $1,351.25 an ounce at 1611 GMT,
against $1,352.65 late in New York on Thursday, having earlier
fallen as low as $1,341.40. U.S. gold futures for December
delivery <GCZ0> eased $2.50 to $1,350.50.
"We still have the end of year approaching, which will come
into focus more and more in the days to come," said Saxo Bank
analyst Ole Hansen.
"U.S. bond yields have come lower over the past two days,
removing some dollar support," he said. "The European situation
will continue to play up, which should support metals."
The euro rose on Friday on hopes that Ireland is near a deal
to get tens of billions of euros from its European partners and
the IMF. A financial aid package for Ireland will be unveiled
next week, EU sources said on Friday. []
Gold typically trends in the opposite direction to the
dollar, as 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.
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."
COMMODITIES UNDER PRESSURE
Oil was under pressure on Friday and most base metals were a
touch softer 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. []
On the physical side of the gold 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. []
Spot gold is now on track to end the week with around a 1
percent loss, its second successive negative weekly performance.
But the outlook for the precious metal remains broadly positive
nonetheless, analysts said.
"We believe the underlying factors driving gold prices
higher have not changed," said Deutsche Bank in a note on
Friday. "We therefore view the latest correction as an
interruption to the long term bullish trend."
Elsewhere silver <XAG=> was bid at $26.94 an ounce against
$26.92, while platinum <XPT=> was at $1,660.24 an ounce against
$1,662 and palladium <XPD=> was at $699.97 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 Alison Birrane)
