* Commodities retreat across the board after rally
* Dollar firms after spike in U.S. Treasury yields
* Jewellery demand returns as prices dip from record
* U.S. palladium ETF holdings reach new record high
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Dec 8 (Reuters) - Gold prices eased towards $1,390
an ounce in Europe on Wednesday as the dollar rallied after a
spike in U.S. bond yields, prompting more investors to cash in
gains after the previous day's record peak.
The precious metal rose to an all-time high at $1,430.95 an
ounce on Tuesday as risk aversion flared in the euro zone, but
quickly slipped as the rally lost traction.
Spot gold <XAU=> was bid at $1,393.95 an ounce at 0920 GMT,
against $1,400.86 late in New York on Monday. U.S. gold futures
for February delivery <GCG1> fell $13.10 an ounce to $1,395.90.
The dollar climbed after a proposed extension in U.S. tax
cuts prompted a spike in bond yields on Tuesday. []
This set the euro on track for a third straight day of
losses. While this has weighed on gold, the metal has proved it
can break its inverse link with the dollar if worries over euro
zone debt lifts its safe-haven appeal while pressuring the euro.
"With all the concerns that are around day-to-day,
investment demand still remains supportive for gold," said
Standard Bank analyst Walter de Wet.
"Until the euro zone debt situation subsides, (the
gold-dollar link) will be fairly weak. (But) there will still be
profit taking if the dollar strengthens fast. It is the speed of
the move which is important, rather than the level."
German government bonds fell on Wednesday, under pressure
from the spike in U.S. Treasury yields, although traders said
the move was overdone given the tension surrounding some of the
euro zone's debt-laden members. []
The rise in U.S. Treasury yields is seen as dollar
supportive near-term despite the fiscal impact of the tax plan,
while the deal could lift growth next year and lessen the case
for bigger monetary stimulus by the Federal Reserve.
"The tendency to take profits may increase as gold and other
precious metals pull back," HSBC said in a note. "Prices could
be vulnerable to a sharp sell-off, as in the run-up to the
holiday period, trading volume is likely to diminish."
PHYSICAL DEMAND RETURNS
Jewellers and investors flocked to the physical markets in
Asia after bullion prices slipped from all-time highs, keeping
premiums steady. []
"On the physical markets there is very little demand above
$1,400 at this stage," said Standard Bank's de Wet. "That has
capped some of the gains."
Holdings of the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust <GLD>, eased to 1,297.726 tonnes by
Dec 7 from 1,298.030 tonnes a day before. []
The world's largest silver ETF, iShares Silver Trust <SLV>,
said its holdings hit another record at 10,941.34 tonnes by
Wednesday. []
Silver <XAG=> was bid at $28.96 an ounce against $28.66,
well off the 30-year high at $30.68 it reached on the previous
day. ScotiaMocatta said in a note that it sees support for the
precious metal at $29.32, the former high.
It said silver had become increasingly expensive versus gold
as the two metals rose. "Over the past seven trading sessions,
the ratio has moved from 50.86 to 46.60," Scotia noted.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the evolution of the gold-silver ratio,
click on: http://r.reuters.com/wyk88q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Platinum <XPT=> was at $1,678 an ounce against $1,688.50,
while palladium <XPD=> was at $732.97 versus $729.97.
ETFS Physical Palladium Shares, the New York-based palladium
exchange-traded product operated by ETF Securities, said its
holdings hit a record 1.084 million ounces on Tuesday, having
broken through a million ounces for the first time a day before.
(Reporting by Jan Harvey; Editing by Sue Thomas)
