* Dollar cedes ground to euro after Thursday's surge
* SPDR gold ETF holdings hold steady
* Indian gold consumers awaiting lower prices to buy-dealers
(Updates prices, adds comment)
By Jan Harvey
LONDON, Dec 18 (Reuters) - Gold retreated towards $1,100 an
ounce on Friday as the euro gave up its early gains against the
dollar, with reports that Iranian troops had made a brief foray
into Iraqi territory prompting buying of the U.S. currency.
Spot gold <XAU=> was bid at $1,100.65 an ounce at 1410 GMT,
against $1,097.80 late in New York on Thursday. U.S. gold
futures for February delivery <GCG0> on the COMEX division of
the New York Mercantile Exchange fell $4.80 to $1,102.60.
The Iran report lifted oil prices, which rose more than 2
percent to above $74 a barrel [], but gold, which often
reacts to geopolitical tensions, shrugged it off to remain
within their earlier range.
"Some scrap selling stands against some investor buying, and
that is keeping (gold) rangebound," Heraeus trader Alexander
Zumpfe said.
Gold rose more than 1 percent earlier in the day, recouping
some of the previous session's 3.5 percent losses, as the dollar
retreated from the 3-1/2 month high it hit against the euro in
the previous session.
Gold prices found support around $1,080-$1,100, but analysts
say they may be vulnerable to further losses through to
year-end, especially if further dollar strength is seen.
"Trading will be relatively thin in the coming days so
investors may be reluctant to take on positions in this market,
and may be closing some positions," said Commerzbank analyst
Eugen Weinberg.
"As most investors have been on the positive side, the
closure of those long positions might dampen sentiment and might
dampen prices."
The dollar was lacklustre against most major currencies
apart from the yen, but pared losses against the euro after
sources told Reuters Iranian troops had briefly entered Iraqi
territory on Thursday. Iraq's deputy interior minister denied
the reports. [][] []
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.
DOLLAR EYED
Gold traders will be closely eyeing developments in the
foreign exchange market, which will be the major influence on
gold towards year-end.
"So far the metal has however managed to stay above the
support level of $1,080 an ounce," said precious metals trading
house Heraeus in a weekly report. "Whether this level will be
tested before Christmas depends mainly on the U.S. dollar."
"Should this continue to gain further, gold could come under
further pressure," it said. "However, should (it) stabilise or
perhaps lose value again, gold could then consolidate between
$1,110 and $1,140 an ounce."
On the investment side of the market, Swiss bank Julius Baer
<BAER.VX> said it expects to see an outflow of 30,000 ounces
from its gold exchange-traded product on Friday.
In India, the world's biggest bullion consumer last year,
spot gold prices fell on Friday as buyers continued to stay away
expecting a further dip in prices, dealers said. []
Among other precious metals, silver <XAG=> was bid at $17.17
an ounce against $17.13. BNP Paribas lifted its silver price
forecasts to $14.60 in 2009 an ounce from $14.40, and to $16.60
an ounce in 2010 from $15.10, citing higher gold prices.
"A stronger than expected rebound in global industrial
production in the second half of this year and a further IP
buoyancy in Asia in 2010 also underpin the upward revision to
our silver price profiles," the bank said in a note.
Platinum <XPT=> was at $1,416 an ounce against $1,421, and
palladium <XPD=> was at $364.50 against $359.
For graphic showing gold's relationship with inflation,
click: http://graphics.thomsonreuters.com/129/GLD_TPSS1209.gif
(Editing by Sue Thomas)
