* Safe-haven bids on geopolitical tensions, euro zone woes
* North Korea artillery hits S. Korean island, kills two
* Fed considered more drastic options to boost economy
* Coming up: U.S. durable goods, personal income due Wed.
(Recasts, updates prices, market activity to close; adds
graphics; changes dateline, previously LONDON)
By Frank Tang
NEW YORK, Nov 23 (Reuters) - Gold rose to a seven-session
high on Tuesday, as tensions on the Korean peninsula and
mounting worries over a European debt crisis prompted investors
to buy both the metal and the U.S. dollar as safe havens.
Gold traded lower through much of the European day on
selling pressure related to expiring options at the $1,370
strike. But bullion broke higher as traders saw heightened
risks in both Europe and the Koreas, with some players
appearing to target the $1,400 mark. []
"Gold's up on sovereign risk issues, worries over Ireland,
and also the Korean incident, which prompted investors to buy
gold and the dollar simultaneously, and that's why the U.S.
bond yields are falling," said James Steel, chief commodity
analyst at HSBC.
U.S. gold futures <GCZ0> rose 1.5 percent to settle at
$1,377.60, with trading volume a third higher than average.
Spot gold <XAU=> rose 0.7 percent to $1,375.49 at 2:50 p.m. EST
(1950 GMT)
One European bank trader reported heavy options trade at
strike prices around $1,370, indicating plenty of selling in
the market around those levels. The trader said selling
pressure disappeared after option expiry.
With risk aversion running high, the typical inverse
correlation to the dollar collapsed, with the one-day average
hourly gold/dollar correlation turning positive for the first
time since September, data showed. (Graphic:
http://link.reuters.com/gub86q )
The dollar jumped by more than 1 percent against a basket
of major currencies <.DXY> as the euro slumped on fears that
Ireland's debt crisis could spread to other members of the euro
zone such as Portugal and Spain and amid signs the Irish
government may have trouble passing an austerity budget.
German Chancellor Angela Merkel said the crisis in Ireland
was different from the one in Greece but just as worrying and
the euro was in an "exceptionally serious" situation.
[]
"This is the new leg of the bull market. Everybody knew
what's going on in Ireland, the next shoe to drop is going to
be Portugal and Spain," COMEX gold option floor trader Jonathan
Jossen.
The safe-haven bid also boosted U.S. Treasury debt prices,
which move inversely with yields. [] []
Spot silver <XAG=> fell 1.2 percent to $27.48 an ounce amid
unusually active futures trading, helped by strong buying in
silver exchange traded funds. COMEX silver futures volume was
near 135,000 lots, one of the most-active days on record.
The rally in silver, up 64 percent this year versus gold's
26 percent gain, has narrowed the gold-to-silver ratio to less
than 50, its lowest level since March 2008 and a point at which
more analysts were beginning to call silver overvalued.
(Graphic: http://link.reuters.com/dyb86q )
FED CONSIDERED MORE DRASTIC STIMULUS
Until this week, strength in the U.S. dollar amid doubt
about the Federal Reserve's bond buyback program has pressured
gold.
Minutes of a meeting released on Tuesday showed that a
resolute but fractured Fed had considered even more-drastic
options to stimulate the economy before it settled on buying
$600 billion in U.S. government bonds. []
The traditional inverse relationship between gold and the
dollar has weakened as it did in May, when Greece asked for
financial aid and bullion's relation to the dollar turned
strongly positive as investors shed holdings of euros.
A common gauge for risk, the CBOE Volatility Index <.VIX>
jumped 15 percent as rising tensions in the Korean peninsula
added to worries about global economic conditions.
Platinum <XPT=> fell by 0.4 percent to $1,654.24 an ounce,
while palladium <XPD=> was down by 1 percent at $684.22.
Prices at 3:09 p.m. EST (2009 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1377.60 19.80 1.5% 25.7%
US silver <SIZ0> 27.572 0.111 0.0% 63.7%
US platinum <PLF1> 1657.70 2.20 0.1% 12.7%
US palladium <PAZ0> 691.10 6.40 0.9% 69.0%
Gold <XAU=> 1375.85 9.76 0.7% 25.5%
Silver <XAG=> 27.48 -0.34 -1.2% 63.2%
Platinum <XPT=> 1648.49 -11.51 -0.7% 12.5%
Palladium <XPD=> 683.72 -7.25 -1.0% 68.6%
Gold Fix <XAUFIX=> 1377.50 16.50 1.2% 24.8%
Silver Fix <XAGFIX=> 27.31 -11.00 -0.4% 60.7%
Platinum Fix <XPTFIX=> 1640.00 22.00 1.3% 11.9%
Palladium Fix <XPDFIX=> 674.00 11.00 1.6% 67.7%
(Additional reporting by Amanda Cooper and Elizabeth Fullerton
in London; Editing by David Gregorio)
