* Gold pares losses as dollar surrenders ground to the euro
* U.S. Treasuries dip as bets on interest rate hike rise
* Portugal's debt woes still simmering, underpinning gold
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By Jan Harvey
LONDON, March 28 (Reuters) - Gold pared losses on Monday as
the dollar ceded ground to the euro, after the precious metal
earlier fell more than 1 percent, but it remained under pressure
as impetus from unrest in the Middle East petered out.
Spot gold <XAU=> was bid at $1,417.00 at 1404 GMT against
$1,427.75 late in New York on Friday, having earlier slipped as
low as $1,409.95 an ounce. U.S. gold futures for April delivery
<GCJ1> fell $8.80 an ounce to $1,417.40.
The precious metal rallied to a record $1,447.40 an ounce
last week as violence in the Middle East and North Africa and
re-emerging sovereign debt concerns in the euro zone prompted
risk-averse buying of gold.
But it struggled to maintain traction at that level.
"In the March rebound, the momentum wasn't there for
follow-through buying," said VTB Capital analyst Andrey
Kryuchenkov. "Yes, we touched a fresh high, but there were no
significant longs created."
He said concerns over how far unrest in the Middle East and
North Africa could spread are starting to ease, while worries
over the indebtedness of some smaller euro zone economies are
softer than they were a year ago.
The euro recovered versus the dollar after European Central
Bank President Jean-Claude Trichet said inflation rates are
durably above the price stability target. Investors have been
primed for the ECB to raise rates as soon as next month. []
The dollar lost some of the support it had garnered from
last week's comments from Federal Reserve official Charles
Plosser, who said the central bank will have to reverse its easy
money policy in the "not-too-distant future" to avoid inflation.
[]
Prospects that U.S. monetary policy may tighten are usually
seen to be negative for gold as a non-interest bearing asset.
TREASURIES UNDER PRESSURE
Elsewhere, German government bonds fell on news the European
Central Bank plans to throw a lifeline to Ireland's banks, while
U.S. Treasuries eased as investors upped interest rate hike
bets. []
Portuguese bonds meanwhile remained under pressure as the
country faced snap elections, which could make it difficult for
Lisbon to finance itself ahead of bond redemptions in April and
June. [] []
Concerns over the fiscal health of the euro zone remain a
supporting factor for gold, but may not prevent an imminent
further correction, analysts said.
"We can fall back to $1,400, maybe even a bit below, and it
still looks good overall. There is still a lot of uncertainty
out there," said Simon Weeks, head of precious metals at the
Bank of Nova Scotia.
"But unless there are more black swan events out there, I
think gold will struggle on the upside."
Elsewhere a report from the U.S. Commodity Futures Trading
Commission on Friday showed speculators in gold and silver
futures and options increased their net long positions as prices
rose last week. []
"Gold's ascent has ... been relatively orderly and
volatility has remained relatively low despite higher spot
prices," said UBS in a note.
"Given persistent global uncertainties, we retain our
one-month forecast at $1,450 as gold should continue to fare
well, but significant moves to the upside will require stronger
participation by investors."
Silver <XAG=> was bid at $36.89 an ounce against $37.29. The
metal rose 6.4 percent last week on gold's coat-tails, hitting
its highest since 1980 at $38.13 an ounce.
Among other precious metals, platinum <XPT=> was at
$1,730.24 an ounce against $1,742.45 and palladium <XPD=> at
$742.47 against $743.97.
(Editing by Keiron Henderson and Alison Birrane)
