* Gold surrenders gains as euro relief-rally fades
* Ireland bailout agreed in principle
* COMING UP: U.S. Chicago Fed index Oct; 1300 GMT
(Updates prices, adds details)
By Amanda Cooper
LONDON, Nov 22 (Reuters) - Gold pared gains on Monday in
line with a decline in the euro, which earlier had benefited
from Ireland's rescue deal, as euphoria over the second euro
zone bailout proved short-lived.
European Union partners voiced relief after Ireland agreed
in principle on a three-year bailout package with the EU and the
IMF to shore up its banking and budget crisis, which initially
boosted the euro and European equities. [] []
The move, which officials hope will help stabilize financial
markets, eroded some of gold's safe-haven appeal, while the
pick-up in the dollar, against which gold usually trades
inversely, further undermined the bullion price.
Holdings of gold in the world's largest exchange-traded fund
rose for the first time in two weeks, indicating investors were
delving back into precious metals, albeit cautiously. []
Spot gold <XAU=> traded flat at $1,355.06 an ounce by 1217
GMT, having earlier risen by as much as 0.77 percent to a
session high of $1,364.55. U.S. gold futures for December
delivery <GCZ0> were last up $2.1 at $1,354.40.
"Safe-haven demand might be falling, but of course, this
strengthening of the euro against the U.S. dollar ... is
probably more important for the gold market," said Peter Fertig,
consultant at Quantitative Commodity Research.
SPECS CUT GOLD
While holdings of metal in ETFs rose last week, speculators
cut their holdings of gold futures, according to data from the
U.S. Commodity Futures Trading Commission last week.
Total open interest in gold futures held by non-commercial
players, which many in the market use as a gauge of speculative
activity, staged its largest weekly fall since late July and has
fallen in five out of the past six weeks.
"Much of the short-term froth is now dissolved -
particularly from the gold market - but that doesn't mean the
stage is set for a re-run of fresh highs," said UBS precious
metals strategist Edel Tully.
"With Thanksgiving approaching, U.S. investors in particular
may be inclined to reduce risk positions over the holiday
period," she added.
Meanwhile, China's steps to rein in inflation could dim
gold's appeal in the world's second-largest consumer after
India, but a drop in bullion prices from all-time high levels
were attracting purchases from other consumers in Asia, local
dealers said. []
Gold prices fell by nearly 1 percent last week as the
certainty of a bailout for Ireland grew and rising U.S. Treasury
yields and stronger economic data supported the dollar
<US2YT=RR>.
Reflecting the concern among some investors about the rise
in the gold price against a backdrop of an improving global
economy, HSBC Global Asset Management said late last week it had
cut its gold allocation in its Absolute Return Fund in half.
"We have ... taken the prudent course of action and halved
our position in gold bullion to 6 percent to reflect the fact
that we remain bullish over the long term but acknowledge that
gold has run ahead of itself at a time when the diversification
benefits have become less obvious," wrote HSBC fund manager
Charlie Morris in a note to clients.
Silver <XAG=> rose by 0.5 percent, rallying for a fourth
successive day, after holdings of metal in the world's largest
silver-backed ETF hit another record high. []
Spot silver was last up at $27.35 an ounce, from $27.21 in
late trade in New York on Friday, having risen by nearly 10
percent in the last five trading days.
Platinum <XPT=> was last down 0.5 percent on the day at
$1,653.90 an ounce, while sister metal palladium <XPD=> was up
0.2 percent at $700.00 an ounce, set for a fourth consecutive
day of increases.
(Reporting by Amanda Cooper; Editing by Michael Taylor)
