PRECIOUS-Gold surrenders gains as dollar maintains traction

                                
 * Gold succumbs to dollar strength as euro flounders
* Traders await outcome of G20 meeting in Seoul
* Palladium outperforms other major precious metals
                                
 (Updates prices, adds comment)
                                
 By Jan Harvey
                                
 LONDON, Nov 11 (Reuters) - Gold retreated from early highs
on Thursday as the dollar extended gains versus the euro, lifted
by escalating concerns over debt in some euro zone economies and
by a report suggesting U.S. monetary easing may be tempered.
                                
 The precious metal remained supported near $1,400 an ounce,
however, as jitters over the outlook for the euro zone boosted
interest in gold as a safe store of value.
                                
 Spot gold <XAU=> fell to a session low of $1,397.75 an ounce
and was at $1,401.20 at 1531 GMT versus $1,402.70 late on
Wednesday. Earlier it reached a high of $1,417.80 an ounce,
close to the record $1,424.10 an ounce it hit earlier this week.
                                
 U.S. gold futures for December delivery <GCZ0> rose 80 cents
to $1,400.10 an ounce. Gold tends to fall when the dollar rises,
as this erodes the metal's appeal as an alternative investment,
but in times of extreme risk aversion both assets can benefit.
                                
 VTB Capital analyst Andrey Kryuchenkov said that, while the
precious metal is susceptible in the short term to losses in the
dollar, in the longer run the increased focus on euro zone debt
issues were likely to be positive for gold.
                                
 "Now that we are clear on QE2 (the second round of U.S.
quantitative easing announced last week), the attention is back
on the euro zone debt troubles, which is bullish for gold should
risk aversion escalate from here," he said.
                                
 He said investors should watch "CDS spreads on Ireland/
Portugal, the Vix (U.S. volatility index), euro zone peripheral
yields spreads over the bund and naturally the dollar index", to
gauge risk aversion among investors.
                                
 The dollar rose against the euro as investors fretted over
the outlook for the budget deficits in Ireland and Portugal, and
after a U.S. think tank report said the Fed may scale back the
size of its quantitative easing plan. [FRX/]
                                
 Irish and Portuguese debt premiums over German government
bonds hit new highs on Thursday, pushing up other peripheral
euro zone yields, as scepticism grew that Ireland could escape a
Greek-style financial bailout. [GVD/EUR]
                                
 Doubts over Ireland's ability to repay its debts are
overshadowing attempts at a G20 summit in Seoul to ease currency
tensions and secure commitment to more balanced global growth.
                                
 "Our FX strategists note the dollar has been the best
performing currency so far this week given better-than-expected
U.S. macro data and Treasury auction results pushing US
yields higher," said Barclays Capital in a note.
                                
 "They maintain their view that fears of a 'currency war' are
overdone and beyond the G20 meeting expect the trend of euro
weakness to continue."
                                
 
                                
 SCRAP SELLING RISES
                                
 In Asia, traditionally a key region for gold consumption,
gold scrap selling increased after spot prices hit record highs,
though it fell short of meeting burgeoning demand. [GOL/AS]
                                
 "The collection of scrap has definitely increased compared
to last week, but not enough to fulfil fresh demand in the
market," said a dealer with Mumbai's Jugraj Kantilal & Co.
                                
 Among other precious metals, silver <XAG=> was at $27.14 an
ounce against $27.20. Holdings of the iShares Silver Trust
<SLV>, the world's largest silver exchange-traded fund, rose 3.4
percent to a record 10,718.82 tonnes by Nov. 10, it said.
                                
 "At 40.6 million ounces over the past five business days,
global ETF investment enjoyed its largest absolute one-week
increase since the first week of the first-ever contract
(iShares) in April 2006," said UBS analyst Edel Tully in a note.
                                
 "The increase in ETF holdings is the most visible sign of
current investor support for silver."
                                
 The ratio of gold to silver -- the number of ounces of
silver needed to buy an ounce of gold -- slipped back towards
the 2-1/2 year low near 50 it reached earlier this week.
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 For a graphic showing the evolution of the gold-silver
ratio, click on:
http://graphics.thomsonreuters.com/AS/0810/RS_20101111120831.jpg
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Elsewhere platinum <XPT=> was at $1,741.50 an ounce against
$1,735.99, while palladium <XPD=> was at $704.97 versus $699.
                                
 Palladium was the biggest riser among other precious metals
on Thursday, up nearly 1 percent, but it was well off the 9-1/2
year high at $740.72 an ounce it hit on Tuesday.
 (Reporting by Jan Harvey; editing by Anthony Barker and Keiron
Henderson)