* Doubt Ireland can tackle crisis prompted safe-haven bids
* Ireland raises fear of contagion into euro zone nations
* Coming up: US preliminary Q3 GDP due Tuesday
(Recasts, updates with comments, market activity, adds
double dateline/byline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, Nov 22 (Reuters) - Gold rose on Monday as
doubt that Ireland can tackle its budget crisis and concern
about possible contagion to other euro zone nations prompted
safe-haven buying.
Bullion initially fell as the rise in the dollar against
the euro undermined gold buying, but the metal rebounded on
signs of uncertainty as to whether the Irish government can
push through an austerity budget crucial to receiving
assistance.
[]
"You are seeing the return of some euro risk back into the
market. You can see some investors put back on safe-haven trade
looking past Ireland and back towards Spain, Portugal and other
European states that may end up with problems," said Frank
McGhee, head precious metals trader of Integrated Brokerage
Services.
On Monday the inverse link between gold and the dollar
index has been largely sporadic. Hourly correlation ranged from
a tight negative 0.7 and negative 0.3, which means there was
little relationship between the two.
Back in May, when the problems surrounding the euro zone's
debt burden became apparent, gold's traditional link to the
U.S. dollar broke down as investors sought an alternative to
the euro, although the same phenomenon has not materialized
with this recent resurgence of concern over Europe's finances.
Spot gold <XAU=> rose 0.7 percent at $1,363.75 an ounce at
3:07 p.m. EDT (2007 GMT). U.S. gold futures for December
delivery <GCZ0> settled up $5.50 at $1,357.80.
Turnover was thin ahead of a U.S. Thanksgiving holiday.
Gold futures volume was about 10 percent below its 30-day
average, the lowest since Nov.2, while silver turnover was
largely in line with its average.
Risk aversion alone does not always drive investors into
precious metals, especially if the broader commodities complex
comes under pressure, sweeping bullion lower in the process, as
has been the case in the last three weeks. <.CRB>
Peter Buchanan, senior economist of CIBC World Markets,
said that falling 10-year U.S. Treasury yield provided
underlying support for non-interesting bearing assets such as
gold.
U.S. Treasuries pared price gains on Monday, as the 30-year
bond had gained more than a full point in price as worries
about the European sovereign debt crisis drove investors into
safe-haven Treasuries. []
U.S. yields have risen recently amid a broad unwinding of
long positions that were taken ahead of the Fed's bond-buyback
announcement on Nov. 3. Rising yields, a proxy of U.S. interest
rates, usually weigh on gold.
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.
[]
US SPEC LONGS DROP
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, or spec longs, 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.
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.
Silver <XAG=> rose 2 percent to $27.75 an ounce, rallying
for a fourth successive day, after holdings of metal in the
world's largest silver-backed ETF hit another record high.
[]
Spot silver has risen by nearly 9 percent in the last five
trading days on speculative buying after following a sell-off
after U.S. commodity exchange CME Group <CME.O> rose silver
margins sharply to reduce market volatility.
Platinum <XPT=> slipped 0.2 percent on the day at $1,659.50
an ounce, while sister metal palladium <XPD=> fell 1.3 percent
to $689.22 an ounce.
Prices at 3:09 p.m. EST (2009 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1357.80 5.50 0.4% 23.9%
US silver <SIZ0> 27.461 0.282 0.0% 63.0%
US platinum <PLF1> 1655.50 -15.60 -0.9% 12.5%
US palladium <PAZ0> 684.70 -19.00 -2.7% 67.5%
Gold <XAU=> 1363.24 9.09 0.7% 24.3%
Silver <XAG=> 27.75 0.54 2.0% 64.8%
Platinum <XPT=> 1659.50 -3.50 -0.2% 13.2%
Palladium <XPD=> 690.50 -7.83 -1.1% 70.3%
Gold Fix <XAUFIX=> 1356.50 -1.00 -0.1% 22.9%
Silver Fix <XAGFIX=> 27.42 35.00 1.3% 61.4%
Platinum Fix <XPTFIX=> 1657.00 9.00 0.5% 13.0%
Palladium Fix <XPDFIX=> 700.00 10.00 1.4% 74.1%
(Reporting by Frank Tang; editing by Sofina Mirza-Reid)
