* Gold down in thin trade on rising U.S. short-term rates
* Silver falls for second day on technical selling
* Dollar firms after spike in U.S. Treasury yields
* Coming up: U.S. weekly jobless claims Thursday
(Recasts, updates comments, prices; adds NEW YORK
dateline/byline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, Dec 8 (Reuters) - Gold prices fell more
than 1 percent for a second day on Wednesday as an extended
fall in U.S. Treasury prices fueled profit-taking from
bullion's record run by investors seeking better yield
returns.
Benchmark Treasury yields jumped to a six-month high for a
second straight day, after a deal to extend tax cuts fueled
fears of a swelling budget deficit. [] The dollar gained,
buoyed by hope of improving U.S. economic growth as the
effective tax stimulus filtered through. []
The combined effect of those factors drove profit-taking in
precious metals, sensitive to both interest rates and the
dollar. Gold has rallied 26 percent this year, while silver,
which fell in tandem on Wednesday, has surged 68 percent.
"The positive view on U.S. growth engendered by the tax-cut
agreement and the rest of the Obama and congressional
Republican package triggered a surge in U.S. bond yields," said
James Steel, chief commodities analyst at HSBC.
"Higher rates will weigh on gold prices ... which could be
vulnerable to a sharp sell-off as in the run-up to the holiday
period trading volume is likely to diminish," he said.
Spot gold <XAU=> traded at $1,381.35 an ounce, down 1.4
percent, at 12:39 p.m. EST (1739 GMT), having earlier fallen by
as much as 2.1 percent to a one-week low of $1,371.45. U.S.
gold futures for February delivery <GCG1> fell $26 to $1,383 an
ounce.
"It really is just good old-fashioned profit-taking," said
Credit Agricole analyst Robin Bhar. "This year every time gold
makes a new high, it subsequently collapses.
"It is noticeable that we had quite an influx of momentum
traders as well, as the price was moving higher, and they're
notorious for being short-term players."
Technical selling accelerated the decline in silver prices,
which had jumped to a 30-year high above $30 an ounce, but
investment interest remained high as the world's largest
silver-backed exchange-traded fund hit another record high.
Silver <XAG=> dropped 1 percent to $28.37 an ounce, causing
the gold/silver ratio to stabilize hear a near-four year low.
(Graphic http://r.reuters.com/wyk88q)
HAVEN NO MORE
Gold has lost some safe-haven appeal as, for the first time
in weeks, euro zone debt concerns were placed on the back
burner and investors focused on U.S. economic fundamentals in a
thinning market.
Gold hit an all-time high at $1,430.95 an ounce on Tuesday,
but has now fallen by about 4 percent after the rally ran out
of steam.
The world's largest silver ETF, iShares Silver Trust <SLV>,
said its holdings hit another record at 10,941.34 tonnes by
Wednesday. []
Setting gold on the back foot early in the day was a rally
in the dollar, after the 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.
"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," said RBS
analyst Daniel Major.
The rise in Treasury yields was seen as being supportive to
the dollar in the near term, while the tax deal itself could
lift growth next year and lessen the case for bigger monetary
stimulus by the Federal Reserve.
Platinum <XPT=> dropped 0.9 percent to $1,674 an ounce,
while palladium <XPD=> slipped 0.5 percent to $726.47.
(Additional reporting by Jan Harvey in London; Editing by
Walter Bagley)
Prices at 12:44 p.m. EST (1744 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCG1> 1382.20 -26.80 -1.9% 26.1%
US silver <SIH1> 28.365 -1.412 -4.7% 68.4%
US platinum <PLF1> 1677.00 -28.20 -1.7% 14.0%
US palladium <PAH1> 729.30 -9.40 -1.3% 78.4%
Gold <XAU=> 1381.00 -19.86 -1.4% 26.0%
Silver <XAG=> 28.30 -0.36 -1.3% 68.1%
Platinum <XPT=> 1673.74 -14.76 -0.9% 14.2%
Palladium <XPD=> 726.00 -3.97 -0.5% 79.0%
Gold Fix <XAUFIX=> 1385.50 -9.50 -0.7% 25.5%
Silver Fix <XAGFIX=> 29.02 -148.00 -4.9% 70.8%
Platinum Fix <XPTFIX=> 1683.00 3.00 0.2% 14.8%
Palladium Fix <XPDFIX=> 729.00 8.00 1.1% 81.3%
