* Euro fails to maintain traction after Ireland bailout
* Physical gold demand emerges as prices dip
* Australian Q3 gold production rises 22 pct
(Updates prices, adds comment)
By Jan Harvey
LONDON, Nov 29 (Reuters) - Gold prices steadied near $1,360
an ounce in Europe on Monday, surrendering earlier gains as the
dollar hit a fresh two-month high versus the euro but remaining
supported by concerns over euro zone debt levels.
Investors fear that Portugal may be the next country that
struggles with its sovereign debt after Greece and Ireland were
forced to seek bailouts from the European Union earlier this
year. []
Spot gold <XAU=> was bid at $1,360.50 an ounce at 1438 GMT
against $1,361.73 late in New York on Friday, having earlier
risen as high as $1,367.65. U.S. gold futures for December
delivery <GCZ0> eased $3.00 to $1,359.40.
RBS Global Banking & Markets analyst Daniel Major said euro
zone sovereign debt concerns were pulling gold in two directions
at once. "You have seen moves in the currency markets that are
offsetting, to an extent, the sovereign concerns," he said.
"The stronger dollar ... has clearly put pressure on gold,
and offsetting that you have people looking towards gold as a
hedge against potential devaluation of currencies, and debt
levels, and potential defaults," he added.
EU finance ministers on Sunday endorsed a bailout package to
help Dublin cover bank debts and bridge a budget deficit and
outlined a permanent system to resolve the euro zone debt
crisis. []
A key question is whether the EU has done enough to prevent
debt problems from spreading to other euro zone members such as
Portugal and Spain, something left unresolved after Greece was
bailed out in May. []
RESCUE FUND
"Portugal is the next interesting (story)," said Michael
Widmer, an analyst at Bank of America-Merrill Lynch. "There were
newspaper reports out there suggesting that authorities from the
core countries are trying to put pressure on Portugal to apply
for a bailout from the European rescue fund."
Meanwhile, the spreads between Italian and Spanish 10-year
government bonds and their German equivalent widened to
euro-lifetime highs on Monday. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing a comparison of peripheral euro zone
economies, click on: http://r.reuters.com/zem66q
For a graphic showing bank exposure to Spain and Portugal,
click on: http://r.reuters.com/mav37q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Physical gold demand emerged last week as prices slipped
back towards $1,350 an ounce, especially in Asia, analysts said.
"Our sales to India Friday were the largest since Oct. 27,
when gold traded under $1,330, and more than double the 2010
daily average," UBS analyst Edel Tully said in a note.
"This is a strong indicator that there's much residual
physical demand in the system that will provide ample support on
dips," she added.
On the supply side of the gold market, data showed
Australian gold production rose 22 percent in the third quarter
to 67 tonnes. Australia is the world's second-biggest gold
producer after China. []
Among other precious metals, silver <XAG=> was at $26.74 an
ounce against $26.66. The world's largest silver exchange-traded
fund, the iShares Silver Trust <SLV>, said its holdings fell to
10,711.23 tonnes on Nov. 26 from a record high. []
Platinum <XPT=> was at $1,632.49 an ounce against $1,645,
while palladium <XPD=> was at $675.97 against $674.
(Reporting by Jan Harvey; editing by Jane Baird)
