* Euro slips, looks vulnerable after Ireland downgrade
* Charts show dip opens prospect for further decline
* SPDR gold ETF sees further outflow; Indian demand soft
* 2011 outlook remains bullish for gold
(Recasts; updates prices, comment; adds NEW YORK byline,
dateline)
By Carole Vaporean and Jan Harvey
NEW YORK/LONDON, Dec 17 (Reuters) - Gold prices turned
higher late Friday, moving back to the top of the session
range, as some investors returned to the yellow metal as a
safe-haven play when the euro fell in response to Moody's
downgrade of Ireland's credit rating.
"You're seeing some flight to quality as the euro sells off
in reaction to the downgrade of Ireland and all the other
contagion issues," said Frank McGhee, head precious metals
trader at Integrated Brokerage Services LLC in Chicago.
Spot gold <XAU=> was bid at $1,376.80 an ounce by 3:53 p.m.
EST (2053 GMT), against $1,370.46 late in New York on Thursday.
U.S. gold futures for February delivery <GCG1> were also up,
gaining $8.20 to $1,379.20 per ounce.
Gold has been fluctuating with the dollar/euro exchange
rate and with investors contrasting needs to own safe assets as
Europe faces the threat of debt contagion and to take profits
from gold as stronger economic data lessens the need to guard
against risk.
The euro declined for a second straight week against the
dollar and may extend losses after a multi-notch downgrade of
Ireland's credit rating affirmed the severity of the euro zone
debt crisis. []
The euro remained 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. []
Earlier, gold slipped below $1,370 an ounce as the dollar
moved higher versus the euro, and as U.S. leading economic
indicators jumped in November.
Signs the U.S. economy is gathering steam as the year draws
to a close boosted optimism about prospects for the coming
year, according to two separate economic research firms.
The Conference Board's leading economic indicators jumped
1.1 percent in November, the biggest rise since March and the
fifth straight monthly gain. []
Separately, the Economic Cycle Research Institute said its
gauge of future growth rose to its highest level since May.
Gold sold off after the news, dipping below the 50-day
moving average for the second straight session. But later it
moved back above the medium-term measure, keeping prices within
their higher plateau in a wide 3-month range around peak
levels.
Though the precious metal has been moving closely in line
with fluctuations in the euro-dollar exchange rate as the
financial markets wind down for Christmas, many analysts remain
bullish as they look ahead to 2011.
"I'm still bullish. Realistically, you could see gold
between $1,320 and $1,640. We haven't touched the 200-day
average for some time. We're significantly above it and we
haven't gotten close to testing it for awhile," McGhee said.
He also pointed to the continued need for the Federal
Reserve to carry out its debt repurchase program to keep the
U.S. economy propped up, along with debt contagion in Europe,
as prime reasons gold will stay high next year.
"There is a tremendous amount of talk that the U.S.
recovery is getting to a point that it can stand on its own two
feet. I don't see it happening. If we get true job growth for
an extended period, I might believe it," the analyst said.
For the near term, Thursday's move below $1,372.30 an ounce
opened 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.
"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.
POTENTIAL OPENED
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. []
Among other precious metals, silver <XAG=> rose to $29.14
an ounce in late trade, against $28.87 on Thursday. Platinum
<XPT=> was higher at $1,699.50 an ounce versus $1,694.49 and
palladium <XPD=> pushed up to $739.22 versus $736.50 an ounce.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic 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," HSBC said in a note.
Looking longer term, analysts said autocatalyst metals
platinum and palladium, which have both recorded a stellar year
in 2010, could be set to outstrip gains in gold if the economic
recovery gains traction. []
Prices at 3:56 p.m. EST (2056 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1379.20 8.20 0.6% 25.8%
US silver <SIH1> 29.133 0.351 0.0% 72.9%
US platinum <PLF1> 1698.50 -0.10 0.0% 15.5%
US palladium <PAH1> 738.60 -3.95 -0.5% 80.7%
Gold <XAU=> 1376.95 6.49 0.5% 25.6%
Silver <XAG=> 29.17 0.28 1.0% 73.1%
Platinum <XPT=> 1700.24 5.75 0.3% 16.0%
Palladium <XPD=> 738.97 2.47 0.5% 82.5%
Gold Fix <XAUFIX=> 1368.50 -6.25 -0.5% 24.0%
Silver Fix <XAGFIX=> 28.78 -37.00 -1.3% 69.4%
Platinum Fix <XPTFIX=> 1696.00 9.00 0.5% 15.7%
Palladium Fix <XPDFIX=> 738.00 7.00 0.9% 83.6%
(Editing by Walter Bagley)
