* Euro extends losses against dollar, eyes 7-week low
* Ireland pledges to work with EU-IMF mission on banks
* China's gold consumption set to rise this year
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By Jan Harvey
LONDON, Nov 17 (Reuters) - Gold eased in Europe on Wednesday
as the euro extended losses against the dollar, strength in
which is curbing interest in the metal as an alternative asset,
and as talk of a Chinese rate rise pressured commodities.
Spot gold <XAU=> was bid at $1,335.80 an ounce at 1223 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> eased $3.20 to $1,335.20.
The precious metal has fallen more than 6 percent since
setting a record $1,424.10 an ounce last week, hit by a bounce
in the dollar versus the euro and heavy selling of commodities.
It is softening further as the euro continues its decline
versus the dollar, easing back towards seven-week lows as rising
concerns over Ireland's debt levels undermine confidence in the
single currency. []
"The dollar has rebounded (versus the euro) from $1.42 to
$1.34, so that is quite a big move," said Credit Agricole
analyst Robin Bhar. "I suspect that has been the biggest factor
feeding through."
This led gold to retreat from the record high it hit last
week. "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."
The precious metal remains under pressure from weakness in
commodities overall, with oil and base metals being heavily sold
amid talk that China may raise interest rates to cool growth.
China said on Wednesday it will intervene to control
consumer prices if they rise too quickly, a move that will do
little by itself to tame inflation but could foreshadow harsher
monetary tightening. []
SUPPORT SEEN FROM SOVEREIGN RISK
While at present it is pressuring gold via its impact on the
currency markets, euro zone 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. []
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, as
investors fretted about the stability of paper currencies.
"We have all grown up with this blind faith in paper money,
which is going to crumble," said Edward Ennis, head of
commodities at Rothschild Bank in Zurich.
"Gold and silver will start to reappear, and we are going to
see a lot of strength in these markets to come."
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 $25.24 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 $1,638.49 an ounce against $1,638.50,
while palladium <XPD=> was at $635.97 against $639.47.
(Additional reporting by Laura MacInnes; Editing by Anthony
Barker)
