* Dlr up vs euro as Moody's puts Spain rating on review
* Gold pressured by mild inflation, strong manufacturing
* Safe-haven bids absent; year-end book squaring seen
* Coming up: Jobless claims, housing starts on Thursday
(Recasts, adds comments, updates prices to market close,
changes byline/dateline, previously LONDON)
By Frank Tang
NEW YORK, Dec 15 (Reuters) - Gold fell for the first time
in three days on Wednesday as a dollar rally, tamer inflation
data and year-end book-squaring more than offset safe-haven
buying after ratings agency Moody's said it may downgrade
Spain's debt rating.
The dollar rose nearly 1 percent against a basket of major
currencies as U.S. data showed a steady recovery in New York
state's manufacturing sector. A mild gain in U.S. consumer
prices also reduced bullion's appeal as a hedge against
long-term inflation. []
Renewed contagion risks from the euro zone debt crisis
failed to drive gold higher after Moody's placed Spain's Aa1
ratings on review for a possible downgrade, a reminder that
fiscal problems in Europe are far from over.
"There wasn't aggressive safe-haven buying to push the
market up. It's the end of the year and many books are closed.
People have had huge profits for the year and they decided to
book them now," said COMEX gold options floor trader Jonathan
Jossen.
Spot gold <XAU=> fell 0.7 percent to $1,385.60 an ounce at
2:13 p.m. EST (1913 GMT). U.S. gold futures for February
delivery <GCG1> settled down $18.10 at $1,386.20.
Spot silver <XAG=> dropped 1.2 percent to $29.04 an ounce.
Year to date, silver's 72 percent gain still sharply
exceeded gold's rise of 26 percent, as the gold/silver ratio
held near its lowest level in four years at 47.
COMEX gold and silver futures volume were both about 40
percent below their 30-day averages, preliminary Reuters data
showed. Volume tends to dwindle toward the year-end as some
major trading desks and funds have already closed their books.
Investment demand in the white metal remained strong.
iShares Silver Trust <SLV>, the world's largest silver-backed
ETF, said its holdings hit a record high at 10,964.14 tonnes on
Dec. 14.
Banks' commodity businesses were still in the spotlight
after reports that JPMorgan <JPM.N> had amassed a larger long
position in copper and was unwinding a big silver short.
[]
The Moody's news on Spain fueled concern over the scale of
some euro zone countries' debt, after Greece and Ireland
struggled with their finances earlier this year. This helped
drive gold to a record $1,430.95 an ounce earlier this month.
Some budget experts also fear the United States will face a
Greece-style debt crisis over the coming decade if it does not
bring down budget deficits which hit 9.9 percent of GDP in
fiscal 2009.
"The unease generated by ever-growing budget deficits is
negative for the U.S. dollar and supportive of gold," HSBC said
in a note. "A lack of confidence in the government's
willingness to cut the deficit is an important component in the
gold rally."
(Graphic-Credit ratings of certain euro zone economies:
http://r.reuters.com/get52k)
TREASURY YIELDS RISE
Credit Suisse analyst Tom Kendall said the concern about
euro zone stability and debt will continue into the first
quarter of next year, supporting gold.
"The yields on the 10-year (U.S. Treasury) has come up
almost 40 percent from the yield low and gold is still trading
either side of $1,400. I think that's a very reassuring
performance."
Sharply higher U.S. government bond yields, seen as a proxy
of short-term interest rates, have recently drawn investors
away from gold buying.
Treasury yields, which move in the opposite direction to
prices, have risen on a market view that a combination of
fiscal and monetary stimulus would push growth higher in the
first half of next year.
On Wednesday, benchmark Treasury prices <US10YT=RR> turned
lower after rising earlier in the session.
The world's largest gold exchange-traded fund, the SPDR
Gold Trust <GLD>, said its holdings fell by just over 3 tonnes
on Tuesday. []
Platinum <XPT=> fell 0.5 percent to $1,696.49 an ounce, and
palladium <XPD=> dropped 1.5 percent to $746.97.
(Additional reporting by Amanda Cooper and Jan Harvey in
London)
Prices at 2:47 p.m. EST (1947 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1386.20 -18.10 -1.3% 26.5%
US silver <SIH1> 29.253 -0.535 0.0% 73.7%
US platinum <PLF1> 1704.40 -9.50 -0.6% 15.9%
US palladium <PAH1> 752.65 -15.55 -2.0% 84.1%
Gold <XAU=> 1382.09 -13.52 -1.0% 26.1%
Silver <XAG=> 28.98 -0.42 -1.4% 72.1%
Platinum <XPT=> 1695.24 -9.00 -0.5% 15.7%
Palladium <XPD=> 746.72 -11.25 -1.5% 84.1%
Gold Fix <XAUFIX=> 1388.75 0.50 0.0% 25.8%
Silver Fix <XAGFIX=> 29.06 -82.00 -2.7% 71.0%
Platinum Fix <XPTFIX=> 1701.00 4.00 0.2% 16.0%
Palladium Fix <XPDFIX=> 752.00 4.00 0.5% 87.1%
