* Traders take profits after 11-week high
* Oil falls below $40 a barrel
* Gold hits record high in sterling terms - Reuters data
(Updates prices, adds comment)
By Jan Harvey
LONDON, Dec 30 (Reuters) - Gold declined on Tuesday as oil
prices slipped nearly 2 percent and as traders took profits
after the previous session's 11-week high.
The weaker dollar and interest in bullion as a haven from
risk, as violence continues in the Gaza Strip, limited losses.
Spot gold <XAU=> was quoted at $869.40/871.40 an ounce at
1355 GMT, down from $877.50 late in New York on Monday. In that
session bullion rose to a high of $889.55, its strongest since
Oct. 10, as tensions in the Middle East fuelled buying.
"Gold has been gaining on the back of the recent
developments in the Middle East that emerged over the weekend,"
said Pradeep Unni, senior analyst at Richcomm Global Services.
"However, gains are unlikely to hold as the technical
momentum is quite weak."
U.S. gold futures for February delivery <GCG9> fell $4.00 to
$871.30.
However, the weak pound took spot gold to a new record high
in sterling terms of 611.97 pounds, according to Reuters data,
up from 603.72 late on Monday.
Oil prices shed 2 percent and fell back below $40 a barrel
as fears over falling demand overshadowed the situation in the
Middle East. []
"The situation in the Middle East and Gaza triggered
movements in oil and in gold as well, but given the volumes
actually seen, the reaction was overdone, and a degree of profit
taking has set in," said Simon Weeks, director of precious
metals at the Bank of Nova Scotia.
DOLLAR WEAKNESS
Losses in gold were curbed by weakness in the dollar, which
typically boosts bullion's appeal as a currency hedge. The
dollar softened as traders trimmed long positions in the U.S.
currency in the last few trading days of the year. []
Currency traders were awaiting U.S. data due out later in
the session, including December consumer confidence at 1500 GMT
and Chicago PMI numbers at 1445 GMT, to give fresh direction to
the markets.
The tensions in the Middle East were also supporting gold.
Israel hit the Gaza Strip with fresh airstrikes on Tuesday and
warned it was prepared for "long weeks of action", on the fourth
day of violence in the region. []
"Increased geopolitical risk could redirect tactical
investment flows back into precious metals," said Standard Bank
analyst Manqoba Madinane.
Interest in gold-backed exchange-traded funds remains firm,
meanwhile. Holdings of the world's largest bullion-backed ETF,
New York's SPDR Gold Trust <GLD> rose nearly 5 tonnes to a
record 780.23 tonnes on Dec. 29, the trust said. []
Among other precious metals, spot silver <XAG=> tracked gold
lower, slipping to $10.78/10.86 an ounce from $10.85 late in New
York on Monday, when it touched a near two-week high of $11.23.
"Given the increased demand for safe-haven asset types, we
anticipate silver will look to test the $11.60-12.40 area soon,"
said James Moore, an analyst at TheBullionDesk.com.
Platinum and palladium both eased after the last session's
gains and continue to suffer from fears over the outlook for the
car market.
Spot platinum <XPT=> slid to $897/902 an ounce from $915.50,
while palladium <XPD=> eased to $180/185 an ounce from $185.50.
The U.S. government expanded its bailout of the auto
industry late on Monday, saying it will pump $5 billion into
General Motors' <GM.N> auto and mortgage financing arm GMAC,
which is considered crucial to the company's survival.
[]
Auto manufacturers are major consumers of platinum group
metals, accounting for around half of global demand.
(Reporting by Jan Harvey; Editing by Anthony Barker)
