PRECIOUS-Gold falls on dlr, hedging demand cited on dips

                                

                                
 * Gold briefly fell as low as $1,166.75/oz, down 2.2 pct
                                
 * SPDR Gold Trust <GLD> flat due to U.S. holiday [GOL/SPDR]
                                
 By Risa Maeda
                                
 TOKYO, Nov 27 (Reuters) - Spot gold tumbled more than 2
percent on Friday after hitting an all-time high near $1,195 an
ounce the previous day, as the dollar bounced from 15-month
lows against major currencies and worries about debt problems
in Dubai prompted investors to trim their positions.
                                
 The Dubai worries also pushed Asian equities and
commodities lower across the board.
                                
 But many market players who believe the dollar's declining
trend will extend well into next year are willing to buy gold
on dips, slowing the precious metal's slide.
                                
 Gold is also underpinned by increasing caution among
investors over riskier assets as stocks fell on concerns about
debt problems in Dubai, traders said.
                                
 "The Dubai issue reminded people of the risk of new
economies, resulting in a sell-off in stocks and an inflow of
money into the dollar. But gold is suffering less than other
commodities or stocks are, and that underlines gold's relative
value and investor confidence over its role as a risk hedge,"
said Tetsu Emori, a fund manager at Tokyo-based Astmax Co.
                                
 Traders said the focus is on how U.S. markets will react
after returning from Thursday's Thanksgiving holiday.
                                
 Dubai struggled to ease fears of debt default on Thursday
after its move to delay repayments at two flagship firms shook
confidence in the Middle East as a centre for investment and a
source of capital. [ID:nGEE5AO2FN] [ID:nGEE5AO2FN]
                                
 "Traditionally, European banks are heavily exposed in the
Middle East. But how far U.S. banks are exposed is yet to be
made clear," Emori said.
                                
 Even if U.S. stocks follow other regions lower and fuel
fears about a credit crunch, investors would not sell gold as
heavily as at the time of the financial crisis a year ago,
Emori said.
                                
 "If and when other assets are sold and down, gold will
likely hold onto its shine given current low interest rates,
making it almost the same as cash," he said.
                                
 Spot gold <XAU=> was at $1,172.70 an ounce as of 0648 GMT,
after briefly slumping 2.2 percent to $1,166.75/oz, compared to
New York's notional close of $1,192.60.
                                
 Bullion hit a fresh record high of $1,194.90 on Thursday
before the dollar gained ground on concern that debt problems
in Dubai could undermine the global financial system.
                                
 Gold is set to rise 2 percent this week, marking the fourth
straight week of gains.
                                
 "Gold has not broken above $1,200 just yet. But I think it
could do so any time the currency market turns in favour of
gold," said Tatsufumi Okoshi, senior economist at Nomura
Securities Co.
                                
 In the currency market, the euro was at $1.4911 after
hitting a 15-month peak above $1.51 earlier this week.
                                
 The dollar was up 0.5 percent and off a 15-month low
against a basket of currencies <.DXY> marked the previous day,
although the yen hit a 14-year high of 84.82 to the dollar
<JPY=> early in the morning before paring its gains. [USD/]
                                
 "The currency market is now attracting all of the
volatility, so gold cannot help but follow the ups-and-downs of
the dollar," Okoshi said.
                                
 Bullion has risen more than 30 percent this year, including
a 12 percent rise in November alone on dollar weakness,
expectations of further reserve diversification by central
banks and fears of inflation next year.
                                
 Many expect that more central banks in developing countries
will diversify their foreign currency reserves to gold.
                                
 Sri Lanka's Deputy Finance Minister Sarath Amunugama said
in an interview with Reuters on Thursday the country was
considering buying more gold from the International Monetary
Fund. [ID:nSP353593]
                                
 The IMF said on Wednesday it had sold 10 tonnes of gold to
the Central Bank of Sri Lanka, part of the 403.3 tonnes
approved for sale by the fund's executive board in September.
The fund has already sold 202 tonnes to the central banks of
India and Mauritius. [ID:nN25483719]
                                
 U.S. December gold futures <GCZ9> traded at $1,172.50 per
ounce, down 1.2 percent from the previous close.
                                
 The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings stood at 1,127.860 tonnes
as of Nov. 25, unchanged due to a holiday on Thursday.
[GOL/SPDR]
                                
 Precious metals prices at 0617 GMT
 Metal             Last    Change  Pct chg  YTD pct chg
Turnover
 Spot Gold        1169.30  -23.30   -1.95     32.85
 Spot Silver        17.90   -0.71   -3.82     58.13
 Spot Platinum    1435.00  -17.00   -1.17     53.97
 Spot Palladium    362.00   -6.00   -1.63     96.21
 TOCOM Gold       3251.00  -90.00   -2.69     26.35      
93971
 TOCOM Platinum   3989.00 -130.00   -3.16     50.41      
24174
 TOCOM Silver      497.80  -27.60   -5.25     55.90        
995
 TOCOM Palladium  1014.00  -36.00   -3.43     84.36        
360
 Euro/Dollar       1.4903
 Dollar/Yen         86.12
 TOCOM prices in yen per gram, except TOCOM silver which is
 priced in yen per 10 grams. Spot prices in $ per ounce.
 (Editing by Clarence Fernandez)
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