* Gold rises after US Treasury prices bounce after auction
* Dollar erases initial gains, helping gold
* Coeur CEO: silver to rise on fundamentals, eco. jitters
* Coming up: U.S. consumer sentiment due Friday
(Recasts, updates prices to close, removes LONDON from
dateline)
By Frank Tang
NEW YORK, Dec 9 Reuters) - Gold prices rose in choppy trade
on Thursday, as a bounce of U.S. Treasury prices and a faded
dollar rally prompted investors to switch their focus back to
sovereign debt risks and underlying economic uncertainty.
Benchmark Treasury yields fell from a six-month high,
retracing a portion of a dramatic sell-off earlier this week
after strong demand, particularly from foreign buyers, in an
auction of 30-year bonds. []
The dollar also erased initial gains as Treasury yields
fell. [] The combined effect of rising U.S. bond yields and
a dollar rise prompted profit-taking in gold and commodities in
the past two days.
However, renewed European debt worries and underlying
concern about paper currencies benefited gold after ratings
agency Fitch downgraded Ireland's sovereign debt rating after
an opposition party there said it would vote against a bailout
package for the debt-laden country. []
"If people don't have confidence in the value of the
currency, it doesn't matter if Treasury yields go up. Because,
if the currency is going to lose value, the yield has to go up
significantly to compensate for any ... declining value of the
dollar," said Miguel Perez-Santalla, vice president of sales of
Heraeus Precious Metals Management in New York.
"People are not bailing out on gold to get into Treasuries.
Gold right now is still the place for safe haven," he added.
Spot gold <XAU=> rose 0.2 percent to $1,384.75 an ounce at
3:47 p.m. EST (2047 GMT). U.S. February gold futures <GCG1>
settled $9.60 higher at $1,392.80 an ounce.
Spot silver <XAG=> rallied 0.6 percent to $28.49 an ounce,
after declining to a one-week low of $27.96 on Wednesday. It
hit a 30-year high at $30.68 an ounce on Tuesday.
Dennis Wheeler, chief executive of the top U.S. silver
producer, Coeur d'Alene Mines Corp <CDE.N>, said silver prices
could rise further on a combination of inelastic supply,
soaring demand from ETFs and economic jitters.
"If the uncertainty with regards to economy and investor
anxiety hangs out here, and people seek more wealth protection
in terms of buying silver and gold, then, who knows? Prices can
clearly go higher," Wheeler told Reuters in an interview.
On Thursday, U.S. gold and silver futures volumes were both
sharply lower than their 30-day averages, as some trading desks
and funds were winding down on trades after having closed their
books with record profits ahead of the year end.
The so-called opportunity cost of owning gold -- the yield
investors forfeit for holding a non-interest bearing asset --
rises in tandem with bond yields and investors have seen that
cost automatically spiral this week as Treasuries have fallen.
Gold lost some safe-haven appeal this week as, for the
first time in weeks, euro zone debt concerns were placed on the
back burner and investors focused on U.S. economic fundamentals
in a thinning market.
However, rebounding Treasury prices prompted investors to
seek a safety bet in gold to hedge against economic uncertainty
due to widening U.S. deficits after a deal in Washington to
extend tax cuts and sovereign debt risk.
"The bias is certainly towards risk-on again, and it's a
function of having a couple of points of (U.S. economic) growth
added on because of the extension of the ... tax cuts," said
Daniel Brebner, a strategist at Deutsche Bank.
"There's certainly lots of risk around. Debt is becoming an
issue in both Europe and the U.S., but right now the
macroeconomic policy is towards growth, and I think the market
is reflecting that."
NEAR RECORD
On charts, gold could still be on the defensive in the near
term as the current pattern looked similar to the previous
rallies in November and October, when prices pulled back after
rising to temporary tops, analysts said.
Gold hit its record $1,430.95 an ounce on Tuesday, fueled
by a flurry of fund-buying ahead of the year-end and a
resurgence in risk aversion stemming from Europe's deepening
debt crisis, which has pummeled the government bonds of the
euro zone's most economically fragile members.
With the 3 percent decline over the past three days,
however, physical demand has resurfaced, particularly in Asia,
where premiums for physical delivery in Hong Kong held steady,
while scrap supply was muted.
Platinum <XPT=> fell 0.3 percent to $1,675.24 an ounce,
while palladium <XPD=> rose 1.5 percent to $734.72, taking
heart from the rise in other industrial commodities, such as
crude oil and base metals. [] []
Prices at 3:34 p.m. EST (2034 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1392.80 9.60 0.7% 27.1%
US silver <SIH1> 28.817 0.565 0.0% 71.1%
US platinum <PLF1> 1678.90 -2.50 -0.1% 14.1%
US palladium <PAH1> 741.60 12.65 1.7% 81.4%
Gold <XAU=> 1385.31 3.82 0.3% 26.4%
Silver <XAG=> 28.48 0.15 0.5% 69.1%
Platinum <XPT=> 1674.99 -5.75 -0.3% 14.3%
Palladium <XPD=> 734.72 10.75 1.5% 81.2%
Gold Fix <XAUFIX=> 1391.25 9.25 0.7% 26.0%
Silver Fix <XAGFIX=> 28.41 -61.00 -2.1% 67.2%
Platinum Fix <XPTFIX=> 1691.00 5.00 0.3% 15.3%
Palladium Fix <XPDFIX=> 746.00 9.00 1.2% 85.6%
(Additional reporting by Amanda Cooper in London; Editing by
Walter Bagley)
