* Gold edges back from all-time high as rally peters out
* Europe debt crisis, U.S. money supply in focus
* Silver touches highest since 1980, above $30/oz
* Coming up: U.S. weekly jobless claims Thursday
(Recasts, updates comments and market activity, adds NEW YORK
dateline/byline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, Dec 7 (Reuters) - Gold prices fell from
record highs toward $1,400 an ounce on Tuesday as investors
took profits in thin trade, but the prospect of worsening U.S.
deficits after a tax-cut extension, more monetary easing and a
European debt crisis still underpinned safe-haven demand.
Silver prices also retreated, after breaking above $30 an
ounce in the previous session for the first time since 1980.
"The market had really run out of momentum, and, although
we made new highs, it was more on sentiment than on fresh
business," said Simon Weeks, head of precious metals at the
Bank of Nova Scotia.
U.S. President Barack Obama unveiled a compromise deal to
extend all Bush-era tax cuts for two years. Analysts said gold
was bid as an inflation hedge on uncertainty whether such a
move could worsen the fiscal deficits of the world's biggest
economy. []
Moody's Investors Service is worried the extension of U.S.
tax cuts agreed by Obama and Republican leaders could become
permanent, hurting U.S. finances and the country's credit
ratings in the long run. []
Gold's retreat was in line with a pullback in other
commodities, with copper also easing back from record highs and
oil slipping from an earlier two-year high. [] []
Spot gold <XAU=> dropped 1 percent to $1,409.35 an ounce at
1:05 p.m. EST (1805 GMT), sharply below a record $1,430.95 set
earlier in the session. U.S. gold futures for February delivery
<GCG1> fell $6.10 to $1,410.
Gold priced in euros <XAUEUR=R> also hit a record high at
1,072.03 euros an ounce before retreating.
Spot silver <XAG=> slipped 1.1 percent to $29.82 an ounce,
having earlier hit fresh 30-year highs at $30.68 an ounce.
Gold volume on the COMEX division of the New York
Mercantile Exchange was at 170,000 contracts, 30 percent below
its 30-day average, as some trading desks and funds already
have closed their books ahead of the year end. Silver futures
volume at 95,000 lots was in line with its average.
Some analysts said that dwindling volume for precious
metals futures could signal price declines in the near term, or
at least the metals might already have reached short-term tops
as trading interest faded.
Nonetheless, the precious metal is likely to remain
supported by concerns over the financial health of the euro
zone.
Germany and other euro zone states resisted calls on Monday
from the International Monetary Fund to do more to quell the
bloc's debt crisis, although the euro firmed on optimism that
Ireland would pass an austerity budget. [] []
"Even though the euro is regaining a little bit of strength
against the dollar after the losses yesterday, it is still on
the weak side, and fears of contagion are lingering," said
Peter Fertig, a consultant at Quantitative Commodity Research.
He was referring to worry that debt problems would spread in
the euro zone.
DWINDLING LIQUIDITY
Federal Reserve Chairman Ben Bernanke signaled on Sunday
the U.S. central bank could expand its existing quantitative
easing program by buying more government bonds.
[]
With the U.S. dollar set to come under more pressure from
the prospect of rising money supply, gold should reap the
benefits of investors seeking an alternative to volatile
currencies, analysts said.
However, the end of the year traditionally brings with it
less liquidity and greater potential for rapid shifts in price
direction, meaning that gold could endure more setbacks before
resuming its uptrend.
"Tactical investors have turned positive on gold and silver
and increased their long exposure. In our view, positioning
does not look excessive, suggesting that the sector could
attract further near-term flows," Credit Suisse analysts said
in a note. "However, with markets closing in on critical price
levels, risks of investors' taking profits have increased as
well."
The number of ounces of silver needed to buy one ounce of
gold hit its lowest level since February 2007 at just 46.99,
having declined from a seven-month high this February at
70.91.
Platinum <XPT=> slipped 1.4 percent to $1,696 an ounce,
while palladium <XPD=> lost 2.2 percent to $738.97.
Prices at 1:09 p.m. EST (1809 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCG1> 1409.70 -6.50 -0.5% 28.6%
US silver <SIH1> 29.840 0.100 0.4% 77.1%
US platinum <PLF1> 1705.00 -8.60 -0.5% 15.9%
US palladium <PAH1> 742.00 -9.40 -1.3% 81.5%
Gold <XAU=> 1408.47 -14.38 -1.0% 28.5%
Silver <XAG=> 29.77 -0.37 -1.2% 76.8%
Platinum <XPT=> 1701.50 -19.00 -1.1% 16.1%
Palladium <XPD=> 738.22 -17.25 -2.3% 82.1%
Gold Fix <XAUFIX=> 1420.00 -6.00 -0.4% 28.6%
Silver Fix <XAGFIX=> 30.50 90.00 3.0% 79.5%
Platinum Fix <XPTFIX=> 1724.00 3.00 0.2% 17.6%
Palladium Fix <XPDFIX=> 769.50 7.50 1.0% 91.4%
(Editing by Walter Bagley)
