* Concerns over Ireland's debt levels linger
* Dollar index rises, euro under pressure from debt worries
(Updates prices, adds comment)
By Jan Harvey
LONDON, Nov 15 (Reuters) - Gold held near $1,370 an ounce 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 pressure brought by strength in the dollar.
Spot gold <XAU=> was bid at $1,367.86 an ounce at 1507 GMT,
against $1,366.35 late in New York on Friday. U.S. gold futures
for December delivery <GCZ0> rose $2.20 to $1,367.70.
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.
"Though the bullish stint is very much in place, multiple
economic developments on the currency front seem to be limiting
gold to a narrow range," said Pradeep Unni, senior analyst at
Richcomm Global Services.
"Physical markets are calm after the Friday sell-off, but
bargain hunters are likely to take the markets higher."
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 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, though it pared
gains after mixed U.S. economic data. []
Commerzbank analyst Eugen Weinberg said newly resurfacing
worries over the stability of certain euro zone economies, most
notably Ireland, were "definitely helping" the metal. "That is
the reason why we are not much lower," he said.
RISK AVERSION EYED
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.
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."
Elsewhere silver <XAG=> was at $26.03 an ounce against
$25.99. It underperformed gold on Friday to fall more than 6
percent, its biggest one-day drop since early February.
Among other precious metals, platinum <XPT=> was at
$1,673.49 an ounce against $1,679, while palladium <XPD=> was at
$679.97 against $675.50.
The chief executive of Lonmin <LMI.L>, the world's
third-biggest platinum producer, said on Monday he sees the
platinum market moving into deficit by about 2012 as the auto
sector recovers further. []
Meanwhile market participants said platinum demand in India
may rise by more than 20 percent in 2011 from 10 tonnes now,
driven by record sales by automakers, the biggest users, and as
moneyed consumers spur jewellery sales. []
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.
(Reporting by Jan Harvey; editing by Keiron Henderson)
