* Euro steadies versus dollar after slipping to 7-wk lows
* Ireland pledges to work with EU-IMF mission on banks
* China's gold consumption set to rise this year
(Updates throughout, previous SINGAPORE)
By Jan Harvey
LONDON, Nov 17 (Reuters) - Gold steadied in Europe on
Wednesday, clawing back earlier losses, as the euro's recovery
from seven-week lows against the dollar relieved some downward
pressure on the metal.
Spot gold <XAU=> was bid at $1,338.45 an ounce at 1024 GMT
against $1,339.80 late in New York on Tuesday. Earlier it
touched a low of $1,330.90 an ounce. Meanwhile U.S. gold futures
for December delivery <GCZ0> rose 10 centse to $1,338.50.
The dollar retreated from the previous day's seven-week high
against the euro <EUR=>, with the single currency steadying
after this week's 1.2 percent fall. It has come under pressure
from rising concerns over Ireland's debt crisis. []
"The dollar has rebounded (versus the euro) from $1.42 to
$1.34, so that is quite a big move," said Creit Agricole analyst
Robin Bhar. "I suspect that has been the biggest factor feeding
through."
This led gains that took gold to a record $1,424.10 an ounce
last week to unwind.
"We simply got too overextended," said Bhar. "The rally in
gold has been so strong that we could give back $100-150 an
ounce and still be in a bull market."
"It has got all the uncertainties of currencies, global
economic growth, how this whole euro zone debt (issue) will play
out, inflation expectations -- there are a hell of a lot of
factors that are still supportive for gold."
Sovereign risk could prove a big support factor for gold.
Ireland has pledged to work with a European Union-IMF mission on
steps to help a stricken banking sector, which may lead to a
bailout which Dublin has so far baulked at asking for.
[]
While concerns over the country's ability to service its
debt are pressuring gold via their impact on currencies,
sovereign risk fears could lift gold if they worsen.
DEBT CONCERNS LINGER
When worries over euro zone debt levels first came to the
fore in the second quarter, it sparked a surge in investment
demand for gold and pushed prices to then-record highs.
"Should fear in the euro zone escalate, gold would draw
fresh support from risk-averse buyers similar to what happened
earlier this summer when investors scrambled for the safe haven
asset on fears of sovereign default," said VTB Capital analyst
Andrey Kryuchenkov in a note.
"Otherwise, the market is overly long and some short term
players could still depress prices."
While those investment flows eased in the third quarter,
gold demand has been lifted by a recovery in jewellery buying in
the key Indian market and robust growth in Chinese consumption,
the World Gold Council said on Wednesday. []
China's gold consumption is set to rise by about four
percent from a year earlier to 430 tonnes this year, a senior
executive of China National Gold Corp, one of the country's
largest gold producers, said. []
The Hong Kong Census and Statistics Department said on its
website that the gold flow from Hong Kong to mainland China in
the first nine months of 2010 more than doubled from a year
earlier to 88.06 tonnes. []
Silver <XAG=> was at $25.35 an ounce against $25.47. The
metal has started to underperform gold in recent sessions after
outperforming for most of the year, with the ratio of gold to
silver rebounding from two-year lows.
Platinum <XPT=> was at $1,637.24 an ounce against $1,638.50,
while palladium <XPD=> was at $634.22 against $639.47.
(Reporting by Jan Harvey; Editing by William Hardy)
