* Gold sells off as Dubai highlights sovereign credit risk
* Investors betting bullion's safe-haven appeal intact
* Central bank buying buoyed sentiment early in sessions
(Recasts, updates comments, closing prices, market activity, adds
NEW YORK to dateline)
By Frank Tang and Pratima Desai
NEW YORK/LONDON, Nov 27 (Reuters) - Gold fell in choppy trade
on Friday but finished well above session lows as a dollar rally
fizzled and investors bet that the metal's unique safe-haven
appeal would stay intact in the wake of Dubai debt default fears.
Renewed credit fears initially forced investors to heavily
sell gold and raise cash to cover losses in equities as well as
oil and other commodities.
Bart Melek, global commodity strategist at BMO Capital
Markets, said that gold later recovered some ground due to a
combination of flight-to-quality demand and as the dollar rally
lost steam.
"This sell-off is predicated on concerns about the fragility
of the financial system. It reminds investors that there are still
huge risks out there," Melek said.
For a graphic on the performance of various assets due to
Dubai debt fears:
http://graphics.thomsonreuters.com/119/GLB_RSKA1109.gif
Spot gold <XAU=> cut losses and was at $1,172.90 an ounce by
1:20 p.m. EST (1820 GMT), but was still down from the $1,192.60
quoted late on Thursday. Bullion hit a low of $1,136.80 an ounce,
the lowest since Nov. 20.
Earlier in the session, the precious metal hit a record high
of $1,194.90, driven by expectations that central banks from
emerging countries will keep buying bullion from the International
Monetary Fund.
U.S. December gold <GCZ9> settled down $12.80, or 1.1 percent,
at $1,174.20 an ounce in the COMEX division of the NYMEX.
"We've dropped around $60 today, which has given the people
who haven't been able to join the first rally a chance to enter
the market," said Ole Hansen, senior manager at Saxo Bank.
"The rally for now could be a little bit subdued as we will
run into profit taking as we go into December. But, the strong way
it's coming back up today could bode fresh highs next week."
Dubai said on Wednesday two flagship firms planned to delay
repaying billions of dollars in debt. State-backed Dubai World has
$59 billion of liabilities -- a big chunk of the emirate's total
debt of $80 billion. []
That has raised the specter of default and triggered a
sell-off of risky assets such as commodities and stocks.
Gold, a traditional safe haven, has also been sold because the
higher dollar makes the precious metal more expensive for holders
of other currencies.
But the dollar trimmed its gains against a basket of
currencies and was up only around 0.2 percent, compared with 0.8
percent earlier in the day. []
CENTRAL BANKS SUPPORT
Analysts said some of gold's resilience stemmed from
expectations of gold purchases by central banks in emerging
markets.
Earlier this week the International Monetary Fund said it had
sold 10 tonnes of gold to the Central Bank of Sri Lanka, adding
the sale was part of the 403.3 tonnes approved by its executive
board in September. []
The IMF has already sold 202 tonnes to the Reserve Bank of
India and the Bank of Mauritius.
Other precious metals also bounced from lows. Silver <XAG=>
was at $18.24 an ounce after hitting a two-week low of $17.66 an
ounce, while platinum <XPT=> and palladium <XPD=> touched one-week
lows of $1,418.50 and $351 an ounce respectively.
Platinum was at $1,437 an ounce from $1,452 and palladium at
$361 an ounce from $368.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1174.20 -12.8 -1.1 884.3 32.8
US silver <SIZ9> 18.302 -0.466 -2.5 11.295 62.0
US platinum <PLF0> 1447.10 -32.40 -2.2 941.50 53.7
US palladium <PAZ9> 365.70 -5.25 -1.4 188.70 93.8
Prices at 1:30 p.m. EST (1830 GMT)
Gold <XAU=> 1171.65 -20.95 -1.8 878.20 33.4
Silver <XAG=> 18.25 -0.36 -1.9 11.30 61.5
Platinum <XPT=> 1437.00 -15.00 -1.0 924.50 55.4
Palladium <XPD=> 361.00 -7.000 -1.9 184.50 95.7
Gold Fix <XAUFIX=> 1166.50 2.00 0.2 836.50 39.5
Silver Fix <XAGFIX=> 17.98 -51.00 -2.8 14.76 21.8
Platinum Fix <XPTFIX=> 1426.00 7.00 0.5 1529 -6.7
Palladium Fix<XPDFIX=> 358.00 2.00 0.6 365.0 -1.9
(Additional reporting by Humeyra Pamuk and Veronica Brown in
London; editing by Jim Marshall)
((frank.tang@thomsonreuters.com; +1 646 223 6126; Reuters
Messaging: frank.tang.reuters.com@reuters.net))
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