* Markets still cautious, uncertain on Dubai debt crisis
* Traders see gold supported, major sell-off unlikely
* Dollar falls against a basket of currencies, up vs yen
(Recasts, updates prices and comments, previous TOKYO)
By Humeyra Pamuk
LONDON, Nov 30 (Reuters) - Gold prices eased on Monday to
just over $1,170 per ounce even though currency fundamentals
were favourable, with some investors opting for cash on residual
wariness about Dubai's debt shock.
News that two Dubai flagship firms planned to delay repaying
billions of dollars in debt renewed credit fears had initially
pushed gold down 5 percent.
Traders said that investors had sold gold in a knee-jerk
response last week, after it hit record highs approaching $1,200
per ounce, to raise cash to cover losses in equities as well as
oil and other commodities.
But they were not expecting a major sell-off with support
seen coming from physical buying on dips, the prospect of
further gold buying by emerging market central banks and
bullion's appeal as a hedge against inflation.
Spot gold <XAU=> stood at $1,171.80 an ounce by 1044 GMT,
versus $1,176.70 an ounce late in New York on Friday, when it
tumbled to $1,136.80 an ounce, its lowest since November 20.
The dollar fell 0.5 percent versus a basket of major
currencies <.DXY>. A weaker dollar normally makes dollar-priced
gold more attractive for non-U.S. investors.
"It's more of a question of liquidity at this stage; whether
people will have to liquidate positions in gold an cover
potential losses elsewhere. It has raised the cautiousness in
the market," said analyst Walter De Wet at Standard Bank.
Asian stocks rose but European shares were down even after a
confirmation from Abu Dhabi that it would extend some help to
Dubai as well as moves by the United Arab Emirates to offer
emergency assistance to banks in Dubai.[]
"There's a lot of caution out there in the markets," said
Tom Kendall, precious metals strategist at Mitsubishi. "After
last week...gold doesn't look quite so bullish. It is hard to
make a case to put fresh long positions and the charts are not
looking particularly bullish," he said.
Bullion is still on track for a 12 percent rise in November
alone. The precious metal touched an all-time high of $1,194.90
an ounce last week. So far this year it has gained around 33
percent.
U.S. gold futures for December delivery <GCZ9> were at
$1,172.90 on the COMEX division of NYMEX, compared with
$1,174.20 on Friday.
FRESH HIGHS?
But bullion's long-term appeal remains undimmed, analysts
said on the back of increasing appetite from central banks to
diversify their reserves and buy more gold, further dollar
weakness and the metal's allure as a hedge against inflation.
"The central bank story is definitely bullish for gold.
Also, the physical market still remains strong. We see buying
from current price levels, particularly from Asia," De Wet at
Standard Bank said.
"It's difficult to say whether it would head for fresh highs
this week, but it's likely," he said.
Indian gold traders continued to make purchases as prices
eased further and a stronger rupee, which makes the
dollar-quoted asset cheaper, aided sentiment, dealers said.
[]
"There is no change in the fundamentals because U.S.
interest (rates) will still be low at least until next year's
first half," Wong Eng Soon, an investment analyst at Phillip
Futures in Singapore.
Market volatility deterred investment, with holdings at the
world's largest gold-backed exchange-traded fund, SPDR Gold
Trust <GLD>, steady at 1,127.860 tonnes as of Nov. 27.
[]
Silver <XAG=> was at $18.19 an ounce versus $18.25 an ounce
on Friday, when it hit a near two-week low of $17.66.
Platinum <XPT=> was at $1,441.00 an ounce, above a one-week
low of $1,418.50, but was down from Friday's $1,436.50 an ounce.
Palladium <XPD=> was at $360.00 versus $362 an ounce on Friday,
when it touched a one-week low of $351.
(Additional reporting by ChiKako Mogi, Editing by Veronica
Brown)
((humeyra.pamuk@reuters.com; Reuters Messaging:
humeyra.pamuk.reuters.com@reuters.net; +44 20 7542 9736))
