* Gold down 1 pct as dollar hits 2-month highs vs euro
* Volumes in gold ultra-thin due to US "Black Friday"
(Recasts and updates prices and market activity to close of
U.S. session; adds NEW YORK to dateline)
By Barani Krishnan and Elizabeth Fullerton
NEW YORK/LONDON, Nov 26 (Reuters) - Gold fell 1 percent on
Friday on thin participation from U.S. investors after
Thursday's Thanksgiving holiday and two-month highs in the
dollar, which weighed on the yellow metal's position as a
currency alternative.
Gold bullion <XAU=> fetched bids at just over $1,363 an
ounce late afternoon in New York, versus Thursday's closing bid
of $1,374.12. The intraday low of $1,350.10 held above the key
support of $1,350.
Gold futures' most-active contract in New York, December
<GCZ0>, settled down $10.60 at $1,362.40 an ounce.
Other precious metals fell too. Silver <XAG=> was down
almost 3 percent, palladium <XPD=> 2 percent and platinum
<XPT=> about 1 percent.
"Gold's come off because the dollar's strengthened," said
David Thurtell, analyst at Citigroup. "If a rescue is done for
Ireland, I would think gold will lose some of its bid tone and
sell off next week."
Technical charts and contract options studied by Reuters on
Friday showed the euro should extend losses against the dollar
in the near term after its worst week in over three months on
fears Portugal and Spain will be next to need bailouts after
Ireland.
The euro <EUR=> hit a two-month low of $1.3200 against the
dollar <.DXY> and spreads on peripheral euro zone bonds widened
against the 10-year German Bund as investors focused on the
possibility of euro zone debt crisis spreading.
Even so, Portugal's parliament on Friday approved the final
2011 budget, aimed at sharply reducing the fiscal deficit.
Spain's Prime Minister Jose Luis Rodriguez Zapatero also ruled
out a bailout in the footsteps of Greece and Ireland.
[]
In euro terms <XAUEUR=R>, bullion prices had eased to below
1,025 euros an ounce compared with 1,028.76 euros late on
Thursday. But it was still firmly above the 1,000 euros mark it
fell through on Monday for the first time in a week. (Graphic
of gold in different currencies: http://r.reuters.com/hyv37q)
Volume in gold thin futures was particularly thin as U.S.
markets observed their traditional abbreviated session on the
Friday after Thanksgiving, which is popularly known as "Black
Friday."
By midday in New York, volume in gold futures stood at a
paltry 221,000 lots -- just about half of the level seen the
day after the 2009 Thanksgiving.
"Gold is ... not really marching to any drum at the
moment," said Simon Weeks, trader at London's Scotiamocatta.
"I think it's just drifting in thin quiet Friday conditions
as the currency markets move," he said, adding that bullion
could head lower to between a $1,345 and $1,350 next week.
Besides being a currency alternative, gold also acts as a
safe haven in times of political troubles.
But despite the geopolitical tensions after this week's
artillery exchange between North and South Korea, gold has not
rallied. Analysts said this may have to do largely with the
dollar's strength, which is undermining gold.
"Precious metals are caught between buyers who see them as
a hedge against Korean tension and European sovereign debt
problems, while others have been selling it on the back of the
continued dollar rally," said Ole Hansen, analyst at Saxo
Bank.
Ashraf Laidi, chief market strategist at CMC Markets, said
prospects of an interest rate hike in China was also limiting
gold's ability to exploit its position as a safe haven from the
Korean tensions and European debt crisis.
Investors are concerned that rate hikes to dampen rising
Chinese inflation could severely hit demand for gold and
commodities. China is the world's second-biggest gold consumer
after India and the biggest consumer of base metals.
"One of the main differences between today and February-May
(during the Greek debt crisis) is that the role of the Chinese
tightening stands in the way of any prolonged gold buying,"
Laidi said.
Prices at 3:26 p.m. EST (2023 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1362.40 -10.60 -0.8% 24.3%
US silver <SIZ0> 26.699 -0.829 0.0% 58.5%
US platinum <PLF1> 1645.20 -13.20 -0.8% 11.8%
US palladium <PAZ0> 676.50 -18.90 -2.7% 65.5%
Gold <XAU=> 1364.05 -10.07 -0.7% 24.4%
Silver <XAG=> 26.66 -0.88 -3.2% 58.3%
Platinum <XPT=> 1645.00 -10.95 -0.7% 12.2%
Palladium <XPD=> 678.00 -17.23 -2.5% 67.2%
Gold Fix <XAUFIX=> 1355.00 -11.50 -0.8% 22.7%
Silver Fix <XAGFIX=> 26.62 -82.00 -3.0% 56.7%
Platinum Fix <XPTFIX=> 1639.00 3.00 0.2% 11.8%
Palladium Fix <XPDFIX=> 670.00 13.00 1.9% 66.7%
(Reporting by Barani Krishnan in New York and Elizabeth
Fullerton in London; Editing by Lisa Shumaker)
