* Correlation with dollar erodes
* World Bank's Zoellick says not advocating gold standard
* Coming up: U.S. Treasury auctions 30-year bonds; 1800 GMT
(Updates prices)
By Amanda Cooper
LONDON, Nov 10 (Reuters) - Gold rose by nearly half a
percent on Wednesday, driven by fresh worries about the impact
of the debt burden of some euro zone nations on the regional
economy, and recovering from its most volatile trading day since
May.
Rising concern about Ireland's finances pushed the premiums
investors demand to hold the country's bonds to its highest to
benchmark German Bunds since the launch of the euro.
This put the euro under broad pressure earlier, helping push
the dollar index <.DXY> to its highest in two weeks.
Such dollar strength would normally dent gold's appeal to
non-U.S. investors but this negative correlation retreated to
its weakest in two months, suggesting investor discomfort lies
with the single European currency and its member nations.
Spot gold rose 0.7 percent to $1,402.20 an ounce by 1433
GMT, some 1.7 percent off Tuesday's all-time peak of $1,424.10.
In its most volatile day of trade since May, gold dropped
more than $30 from this peak in the previous session, triggered
by a sharp sell-off in U.S. silver futures caused by a 30
percent increase in margins. []
"In the past few days, what we've seen is the dollar and
gold moving in the same direction and the last time that
happened was leading up to the erosion in confidence in some
peripheral EU countries and this has occurred again," said HSBC
analyst Jim Steel.
"The markets are still on the defensive, they haven't been
rescued yet by the EU issue, but it has probably helped put the
brakes on the decline," he said.
The correlation between spot gold and the dollar index, on a
rolling one-month basis, retreated to minus 0.48, from minus
0.61 the day before, indicating gold's tendency to move in the
opposite direction to the dollar has lessened. A positive
correlation suggests the two assets move in lock-step.
In the second quarter of the year, when the euro zone debt
crisis unfolded, gold and the greenback often moved in tandem as
investors sought refuge from non-euro denominated assets.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a chart of the correlation between spot gold and the dollar
index click on:
http://graphics.thomsonreuters.com/gfx1/AC_20101011143341.jpg
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
BACK TO GOLD
Investors have been delving into gold once more as evidenced
by holdings of bullion in the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust, holding steady over the
past couple of weeks, just above 1,290 tonnes. []
Gold priced in euros <XAUEUR=R> was last up 0.7 percent at
1,015.95 euros, while Swiss franc-priced bullion <XAUCHF=R> was
up 1.2 percent at 1,358.07 francs and sterling-priced gold
<XAUGBP=R> was flat on the day at 869.45 pounds an ounce. It was
under some pressure from the rise in sterling after the Bank of
England's inflation report. []
Currency tensions are high on the agenda at this week's G20
summit of advanced and developing nations in Seoul, where U.S.
President Barack Obama sought to swing the spotlight back onto
global imbalances, while an early draft statement cited by Dow
Jones Newswires echoed an earlier finance minister's pledge to
move towards more market-determined currency rates.
[]
Meanwhile, World Bank President Robert Zoellick said on
Wednesday he was not advocating a return to a gold standard,
days after he suggested the world's largest nations consider
gold as an indicator to help set foreign exchange rates.
[]
Meanwhile, silver was the top performer of the precious
metals complex with a 3 percent rise, following its most
volatile trading session since early 2009 the day before.
The CME Group, which owns the COMEX exchange, said it would
raise the margin requirement for silver futures to $6,500 a
contract from $5,000 previously, implying a leverage ratio of
21.5, to curb some of the volatility that has developed.
"It is important to put yesterday's price action into
context: despite its violence, Tuesday's pullback only brought
precious metals prices back to Monday's levels and should
therefore be seen as a clearing-out of intraday froth," said UBS
precious metals strategist Edel Tully, in a note.
"Pullbacks aren't a bad thing - they test the conviction of
existing longs and the eagerness of those waiting on the
sidelines."
Silver was at $27.70 an ounce, up by 3 percent on the day,
while holdings of metal in the iShares Silver Trust <SLV>, the
world's largest silver ETF, hit a new record high, indicating
strong investor demand. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Silver exchange-traded fund trading volumes reached 10 times
the average, graphic:
http://link.reuters.com/fef64q
Gold price performance: http://link.reuters.com/juz44q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
In the platinum group metals, palladium <XPD=> rose by 2.2
percent to $705.50, easing back from nine-year highs of $740.72
in the previous session.
Platinum <XPT=> was almost flat at $1,760.74 an ounce, off
Tuesday's two-year high of $1,806.5.
(Additional reporting by Rujun Shen in Singapore; Editing by
Alison Birrane)
