* Gold up after reports of tensions in Iran-Iraq border
* SPDR gold ETF holdings hold steady
* Indian gold consumers await lower prices -dealers
(Recasts, updates prices, market activity; new byline,
changes dateline, previously LONDON)
By Carole Vaporean
NEW YORK, Dec 18 (Reuters) - Gold prices rose on Friday,
reversing declines in a choppy session, but buying related to
short covering, inflation worries and geopolitical tensions
trumped selling prompted by profit-taking and a strong dollar.
Spot gold <XAU=> rose to $1,112.50 an ounce in late New
York trade from Thursday's late quote at $1,097.80 a tonne.
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange rose $4.10 to
settle at $1,111.50 an ounce.
Gold hit a session high of $1,118.10 an ounce on COMEX and
traded near session highs until late.
Gold pushed into positive territory despite the dollar's
gains on the euro. The U.S. currency was headed for its best
weekly gain since April. []
The euro fell below $1.43 for the first time since early
September before recovering some losses.
Strength in the U.S. unit usually curbs gold's appeal as an
alternative investment, making the precious metal more
expensive for holders of other currencies.
Inflationary implications of oil's rally also helped gold
prices turn higher. Oil's rise above $73 a barrel added to
other recent indications that the pace of inflation was
starting to pick up.
U.S. crude futures rose nearly 1 percent in choppy
pre-holiday trade on short cover buying ahead of Monday's
January contract expiry, and cold weather across the U.S. and
Europe. []
Gold's appeal as a safe-haven play also came into focus
after news spread of a dispute between Iran and Iraq, lifting
oil prices as well.
Iraqi reported that 11 Iranian troops entered Iraqi
territory, raising the Iranian flag at a disputed oilfield.
[]
"Earlier margin selling (in gold) was overcome by Friday
short covering, following Iran crude news," said George Gero at
RBC Wealth Management in New York.
With players on both sides of the gold play heading into
year end and setting up for early 2010 next week could also
prove to be volatile, said analysts.
"Next week could be even more volatile as we approach year
end and mark to the market of futures accounts," said Gero.
Heraeus trader Alexander Zumpfe said, "Some scrap selling
stands against some investor buying, and that is keeping (gold)
rangebound," Heraeus trader Alexander Zumpfe said.
Gold prices found support around $1,080-$1,100, but
analysts say it may be vulnerable to further losses through to
year-end, especially if further dollar strength is seen.
"Trading will be relatively thin in the coming days so
investors may be reluctant to take on positions in this market,
and may be closing some positions," said Commerzbank analyst
Eugen Weinberg.
DOLLAR EYED
On the investment side of the market, Swiss bank Julius
Baer <BAER.VX> said it expects to see an outflow of 30,000
ounces from its gold exchange-traded product on Friday.
In India, the world's biggest bullion consumer last year,
spot gold prices fell on Friday as buyers continued to stay
away expecting a further dip in prices, dealers said.
[]
Among other precious metals, silver <XAG=> was bid at
$17.27 an ounce against $17.13.
BNP Paribas lifted its silver price forecasts to $14.60 in
2009 an ounce from $14.40, and to $16.60 an ounce in 2010 from
$15.10, citing higher gold prices.
"A stronger than expected rebound in global industrial
production (IP) in the second half of this year and a further
IP buoyancy in Asia in 2010 also underpin the upward revision
to our silver price profiles," the bank said in a note.
Patinum <XPT=> rose to $1,428 an ounce against $1,421, and
palladium <XPD=> picked up to $363.50 against $359.
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For graphic showing gold's relationship with inflation,
click: http://graphics.thomsonreuters.com/129/GLD_TPSS1209.gif
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(Additional reporting by Jan Harvey in London; Editing by
David Gregorio)
