* Dollar recovers as debt restrucuturing worries hurt euro
* Expectations for end to QE2 fade after U.S. data
* Gold:silver ratio falls to lowest in 28 years
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, April 14 (Reuters) - Gold prices steadied on
Thursday, surrendering earlier gains, as speculation that some
euro zone countries may be forced into debt restructuring
knocked the euro, lifting the dollar from 16-month lows.
The precious metal rose in earlier trade and the dollar fell
after data supported expectations U.S. monetary policy would
remain accommodative, keeping the opportunity cost of holding
bullion low. But it failed to hold those gains.
Spot gold <XAU=> was bid at $1,456.66 an ounce at 1200 GMT,
against $1,454.61 late in New York on Wednesday. Silver <XAG=>
was bid at $40.66 an ounce against $40.62.
"Prices came right off late morning when the dollar came
back," said Ole Hansen, senior manager at Saxo Bank. "The
worries that Portugal and Greece may have to (restructure) their
debt has given the euro a knock this morning."
"Interesting to see that we have made three attempts on
EURUSD upside in as many sessions and failed," he added. "Euro
gold shows the weak performance of gold so far this year."
Gold priced in euros <XAUEUR=R> has fallen 4.5 percent so
far this year.
The euro fell on Thursday on speculation that countries
including Greece and Ireland may be forced to restructure their
massive debts. While such concerns often support gold, that is
currently being outweighed by currency effects. []
Gold hit record highs above $1,476 an ounce earlier this
week, supported by dollar weakness, unrest in the Middle East
and North Africa, and euro zone debt. But U.S. monetary policy
is expected to be the main driver of gold prices this year.
The dollar hit a 16-month low against a currency basket
early on Thursday after Wednesday's U.S. data did nothing to
change the view the central bank would keep its $600 billion
asset buying programme in place until June.
Some analysts had suggested that if the economy were doing
significantly better and inflation concerns picked up the Fed
could rein in its second round of quantitative easing before it
completes at the end of June. Analysts say this is now unlikely.
DEBATE SUBSIDING
"The debate over an early end to QE2 is finally subsiding,
with the chances of an early end rapidly diminishing," said HSBC
analyst James Steel in a note. "This is supportive of gold."
He said his bank's currency strategists believed "the
complacency in the financial markets as regards U.S. interest
rates suggests that rates are likely to "stay lower for longer".
This is also likely to work against the U.S. dollar."
Among other commodities, crude oil eased on concerns about
the impact of high prices on demand, although continued unrest
in the Middle East and a sharp fall in U.S. gasoline stocks
limited losses. []
Meanwhile, holdings of the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust <GLD>, fell
another 3.3 tonnes on Wednesday, reflecting softer investor
interest in the funds. []
The amount of bullion the trust holds to back its securities
has fallen 67.8 tonnes so far this year, against a rise of 7.4
tonnes in the same period of 2010.
Holdings of the largest silver ETF, the iShares Silver Trust
<SLV.P>, slipped to 10,969.71 tonnes on Wednesday from 11,212.53
tonnes a day before. []
Silver prices remain extremely elevated, however, after
hitting a 31-year high at $41.93 an ounce earlier this week. The
gold:silver ratio fell below 36 for the first time in 28 years.
Among other precious metals, platinum <XPT=> was at
$1,769.24 an ounce against $1,769.15, while palladium <XPD=> was
at $760.47 against $760.63.
(Reporting by Jan Harvey; editing by Keiron Henderson)
