* Gold pares losses as dollar surrenders ground to euro
* U.S. Treasuries dip as bets on interest rate hike rise
* Portugal's debt woes still simmering, underpin gold
(Updates prices, dollar/euro; adds NEW YORK byline/dateline)
By Jan Harvey and Carole Vaporean
LONDON/NEW YORK, March 28 (Reuters) - Gold prices continued
to cut their losses on Monday as the dollar erased gains on the
euro, once the European Central Bank seemed likely to tighten
monetary policy as early as next month.
Earlier, the precious metal fell more than 1 percent when
the dollar had gained ground on the euro. But the precious
metal remained under pressure as impetus from unrest in the
Middle East petered out.
Spot gold <XAU=> was bid at $1,422 an ounce at 12:04 p.m.
EDT (1604 GMT), against $1,427.75 late in New York on Friday.
It slipped earlier to a session low at $1,409.95 an ounce. U.S.
gold futures for April delivery <GCJ1> were down $3.30 at
$1,422.90 per ounce.
The precious metal rallied to a record $1,447.40 an ounce
last week as violence in the Middle East and North Africa and
reemerging 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 were starting to ease, while worries
over the indebtedness of some smaller euro zone economies are
softer than they were a year ago.
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.
Then, the euro erased losses against the dollar when it
seemed the European Central Bank would tighten monetary policy
as early as next month, softening concerns about Germany's
ruling party losing a key state election. []
ECB President Jean-Claude Trichet on Monday said inflation
rates are durably above its price stability target. []
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 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," UBS said 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=> also trimmed losses to $37.89 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 bid at
$1,740.49 an ounce against $1,742.45 and palladium <XPD=>
firmed to $744.72 against $743.97 on Friday.
(Editing by Walter Bagley)
