* Concerns over Ireland's debt levels linger
* Dollar index rises, euro under pressure from debt worries
* Caution abounds on wider markets, equities soften
(Updates prices)
By Jan Harvey
LONDON, Nov 15 (Reuters) - Gold held near $1,365 an ounce in
Europe on Monday, steadying after its biggest one-day fall since
July 1 in the previous session, as concerns over euro zone
sovereign debt levels offset strength in the dollar.
Spot gold <XAU=> was bid at $1,365.95 an ounce at 1227 GMT,
against $1,366.35 late in New York on Friday. U.S. gold futures
for December delivery <GCZ0> rose 10 cents to $1,365.60.
The metal staged its largest one-day drop in 4-1/2 months on
Friday, retreating from last week's record $1,424.10, on concern
the market had become overbought and as talk of a potential
interest rate rise in China knocked commodities sharply lower.
"The rise above $1,400 was probably premature and gold was
overbought. Right now, I wouldn't be surprised to see further
weakness on a lack of a new speculative buying," said
Commerzbank analyst Eugen Weinberg.
He said newly resurfacing worries over the stability of
certain euro zone economies, most notably Ireland, was
"definitely helping" the metal. "That is the reason why we are
not much lower."
A spike in the borrowing costs of peripheral euro zone
members over the past weeks has raised concerns about their
ability to cut debt. []
German government bond prices fell on Monday, however, as
some safe-haven flows were unwound on talk that Ireland may ask
the European Union for aid to manage its debt crisis. []
Ireland on Sunday did not rule out the possibility that it
might have to turn to Europe to deal with its debt crisis but
said that no application had been made for assistance yet.
[]
Concerns over Ireland and other euro zone economies
pressured the euro <EUR=> back towards last week's six-week low,
while the dollar index hit a six-week high, boosted by higher
U.S. Treasury yields. []
A stronger dollar typically weighs on gold, because it dents
interest in the metal as an alternative asset and makes it more
expensive for holders of other currencies.
RISK AVERSION EYED
However, when risk aversion rises sharply, as at the height
of the sovereign debt crisis in the second quarter, they can
move in the same direction as both serve as havens from risk.
This may happen again if current euro zone debt fears worsen,
analysts said.
"Jittery trading is likely to persist as long as uncertainty
over Ireland haunts investor sentiment," said VTB Capital
analyst Andrey Kryuchenkov in a note. "For bullion to rebound,
risk aversion would need to sour completely and investor fears
be confirmed."
He added: "For now, there could be more to the downside as
we pull back towards the long-term uptrend."
Among other commodities, oil prices held near $85 a barrel
after falling more than 3 percent on Friday, and base metals
prices were soft as concerns over the prospect for a further
Chinese interest rate hike lingered. [] []
Silver <XAG=> was bid at $26.00 an ounce against $25.99,
having underperformed gold on Friday to fall more than 6
percent, its biggest one-day decline since early February.
Among other precious metals, platinum <XPT=> was at
$1,674.99 an ounce against $1,679, while palladium <XPD=> was at
$673 against $675.50.
Although it is underperforming other precious metals on
Monday, palladium remains on track to post the biggest gains of
the complex this year, on expectations that demand from
automakers and other industrial users will rise.
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For a graphic showing the relative price performance of key
commodities this year, click on:
http://graphics.thomsonreuters.com/F/10/CMD_PF.html
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(Reporting by Jan Harvey; Editing by Jane Baird)
