PRECIOUS-Gold eases; uncertainty persists on Dubai crisis

                                
  * Markets still cautious, uncertain on Dubai debt crisis
  * Traders see gold supported, major sell-off unlikely
  * Dollar falls against a basket of currencies
                                
 
                                
 (Updates prices and comments)
                                
 By Humeyra Pamuk
                                
 LONDON, Nov 30 (Reuters) - Gold prices eased on Monday to
around $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 and initially
pushed gold down 5 percent on Friday.
                                
 Traders said 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 $1,169.40 an ounce by 1244 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 0.36 percent versus a basket of major
currencies <.DXY>. A weaker dollar normally makes dollar-priced
gold more attractive for non-U.S. investors.
                                
 "There's still uncertainty in the market," Michael
Kempinski, Commerzbank trader said. "There are still fears about
the possible big impact from Dubai and people are still unsure
about what to do."
                                
 United Arab Emirates stocks dived, and European shares were
also down as investors waited for clarity on Dubai's plan to
delay repaying billions of dollars in debt and government word
on how it would tackle a crisis that has rattled global markets.
[ID:nSP362937]
                                
 Tom Kendall, precious metals strategist at Mitsubishi, said
gold was poised for further losses in the near term before
resuming its rally, which saw it rise to an all-time high last
week.
                                
 "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."
                                
 Bullion is still on track for a 12 percent rise in November
alone. The precious metal is only 2 percent below its record
high of $1,194.90 an ounce. So far this year it has gained
around 33 percent.
                                
 U.S. gold futures for December delivery <GCZ9> were at
$1,170.40 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, due to 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, helped sentiment, dealers said.
[ID:nBOM397593]
                                
 "There is no change in the fundamentals because U.S.
interest (rates) will still be low at least until next year's
first half," said 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.
[GOL/SPDR]
                                
 Silver <XAG=> was at $18.13 an ounce versus $18.25 an ounce
on Friday, when it hit a near two-week low of $17.66.
                                
 Platinum <XPT=> was $1,438.00 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 $356.50 versus $362 an ounce on Friday,
when it touched a one-week low of $351.
 (Additional reporting by ChiKako Mogi, Editing by Veronica
Brown and Sue Thomas)
((humeyra.pamuk@reuters.com; Reuters Messaging:
humeyra.pamuk.reuters.com@reuters.net; +44 20 7542 9736))