* Euro firms but remains vulnerable after Ireland downgrade
* Charts show price dip opens prospect of further move lower
* SPDR gold ETF sees further outflow; Indian demand soft
(Updates prices)
By Jan Harvey
LONDON, Dec 17 (Reuters) - Gold firmed a touch in Europe on
Friday, supported by a retreat in the dollar versus the euro and
by concerns over sovereign debt levels in the euro zone after
Moody's cut Ireland's credit rating.
Spot gold <XAU=> was bid at $1,371.80 an ounce at 1254 GMT
against $1,370.46 late in New York on Thursday, having slipped
to a near three-week low of $1,361.35 an ounce in that session.
"We are into a typical end-of-year scenario now, where order
flow more than fundamentals drives the market," said Saxo Bank
senior manager Ole Hansen.
The U.S. Commodity Futures Trading Commission on Thursday
released a long-awaited proposal to set position limits in
commodity markets.
"Yesterday's story about CFTC limits was enough to make a
few investors call it a day and some position squaring was
seen," Hansen said. "Today we are jumping on the weaker dollar
and retracing back up again." []
"It will be choppy for the rest of the year but unless we
see any dramatic news, investors are happy with their positions
based on expectations for further price increases into 2011."
U.S. gold futures for February delivery <GCG1> rose $2.00 an
ounce to $1,373.00.
Better-than-expected data on German business morale from the
Ifo think tank helped the euro rise 0.8 percent versus the
dollar, weakness in which increases gold's appeal as an
alternative asset and makes assets priced in the U.S. unit
cheaper for holders of other currencies. []
But the single currency remains vulnerable after the Moody's
cut and as an agreement by European Union leaders on Thursday to
set up a permanent crisis management mechanism failed to calm
fears about the region's debt crisis. []
EU leaders agreed at the summit to make minor changes to the
group's governing treaty to establish a permanent mechanism from
mid-2013 to resolve sovereign debt problems. []
"The EU summit of Heads of State and Government has not
produced any surprises," said Commerzbank in a note. "Merely the
key points of a permanent crisis mechanism, drafted by finance
ministers ahead of the meeting, have been confirmed."
"Uncertainty among market players is likely to continue."
POTENTIAL OPENED
Thursday's move below $1,372.30 an ounce opens up the
potential for a fall towards $1,351.50 an ounce, Swiss bank UBS
said in a note.
A break of that level could mean a further move down to
$1,330, while a move through $1,408 would be needed to signal an
end to the correction, it added.
Investor demand for gold-backed exchange-traded funds
remained light, with holdings of the world's largest, New York's
SPDR Gold Trust <GLD>, falling to a two-month low of 1,283.757
tonnes on Thursday. []
Gold buying in the world's biggest bullion consumer, India,
was also subdued as banks closed for a public holiday, and
dealers said trading was expected to remain thin as the wedding
season came to an end. []
Elsewhere a report said China's Guotai Asset Management
plans to launch the country's first mutual fund to invest in
overseas commodity ETFs. [] []
Among other precious metals, silver <XAG=> was at $28.78 an
ounce against $28.87, platinum <XPT=> at $1,691.99 an ounce
versus $1,694.49 and palladium <XPD=> at $733.22 versus $736.50.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic showing relative price performance of key
precious metals: http://r.reuters.com/qup62r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"Near-term price action in the platinum group metals is
being more determined by the search for hard assets and the
rallies in gold and silver, than by immediate industrial
demand," said HSBC in a note.
Other commodities also rose, with oil climbing towards $88 a
barrel as cold weather boosted distillates demand and the dollar
weakened, and base metals firming. [] []
(Reporting by Jan Harvey; Editing by Anthony Barker)
