* Commodities retreat across the board after rally
* Dollar firms after spike in U.S. Treasury yields
* Jewellery demand returns as prices dip from record
* U.S. palladium ETF holdings reach new record high
(Updates throughout with comment, refreshes prices)
By Amanda Cooper and Jan Harvey
LONDON, Dec 8 (Reuters) - Gold fell for a second day on
Wednesday, after a surge in U.S. bond yields boosted the dollar
and encouraged investors to book more gains after the previous
day's record peak.
Gold hit an all-time high at $1,430.95 an ounce on Tuesday
as risk aversion flared in the euro zone, but quickly slipped as
the rally lost traction.
Spot gold <XAU=> was bid at $1,389.80 an ounce at 1355 GMT,
against $1,400.86 late in New York on Monday. U.S. gold futures
for February delivery <GCG1> fell $18.4 an ounce to $1,390.60.
The dollar climbed after a proposed extension in U.S. tax
cuts prompted a spike in bond yields on Tuesday, which in turn
raised the cost of holding gold to non-U.S. investors []
While gold has shaken off its traditional inverse
relationship with the U.S. currency in the past, when risk
aversion has worsened, this has not been the case this week,
when the negative correlation has strengthened.
"Clearly there is a more risk-negative tone across the
markets today, but I don't think it's been enough to push people
into gold's safe-haven qualities," said RBS analyst Daniel
Major.
"If you do get higher yields, the opportunity cost of
holding a zero-yielding asset like gold is a bit of a concern
but it's more of a currency play in the near term," he said.
SAFE-HAVENS BATTERED TOO
German government bonds fell on Wednesday, under pressure
from the spike in U.S. Treasury yields, although traders said
the move was overdone given the tension surrounding some of the
euro zone's debt-laden members. []
The rise in U.S. Treasury yields is seen as dollar
supportive near-term despite the fiscal impact of the tax plan,
while the deal could lift growth next year and lessen the case
for bigger monetary stimulus by the Federal Reserve.
This set the euro on track for a third straight day of
losses. While this has weighed on gold, the metal has proved it
can break its inverse link with the dollar if worries over euro
zone debt lifts its safe-haven appeal while pressuring the euro.
"With all the concerns that are around day-to-day,
investment demand still remains supportive for gold," said
Standard Bank analyst Walter de Wet.
"Until the euro zone debt situation subsides, (the
gold-dollar link) will be fairly weak. (But) there will still be
profit taking if the dollar strengthens fast. It is the speed of
the move which is important, rather than the level."
Jewellers and investors flocked to the physical markets in
Asia after bullion prices slipped from all-time highs, keeping
premiums steady. []
On the investment front, holdings of the world's largest
gold-backed exchange-traded fund, the SPDR Gold Trust <GLD>,
eased to 1,297.726 tonnes by Dec 7 from 1,298.030 tonnes a day
before. []
The world's largest silver ETF, iShares Silver Trust <SLV>,
said its holdings hit another record at 10,941.34 tonnes by
Wednesday. []
Silver <XAG=> was bid at $28.20 an ounce against $28.66,
still well off the 30-year high at $30.68 it reached on the
previous day, causing the gold/silver ratio in turn to pull back
from its recent near-four year low.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the evolution of the gold-silver ratio,
click on: http://r.reuters.com/wyk88q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Platinum <XPT=> was at $1,680.99 an ounce against $1,688.50,
while palladium <XPD=> was at $726.47 versus $729.97.
ETFS Physical Palladium Shares, the New York-based palladium
exchange-traded product operated by ETF Securities, said its
holdings hit a record 1.084 million ounces on Tuesday, having
broken through a million ounces for the first time a day before.
(Additional reporting by Jan Harvey; Editing by Alison Birrane)
