* Gold caught in commods selling as caution batters markets
* Dollar surrenders gains vs euro as EU leaders reassure
* Platinum, silver, palladium all slide in gold's wake
(Updates prices)
By Jan Harvey
LONDON, Nov 12 (Reuters) - Gold was lower on Friday as
worries over some euro zone countries' ability to service their
debts battered stocks and commodities, but the metal recovered
from lows as the dollar surrendered early gains versus the euro.
Worries that Ireland would, like Greece, need a bailout is
unsettling investors, while talk of a possible Chinese rate hike
depressed commodities, pushing this week's Group of 20 meeting
in Seoul into the background.
Spot gold <XAU=> was bid at $1,387.80 an ounce at 1219 GMT
against $1,409.39 late in New York on Thursday, off a session
low of $1,378.00 an ounce. U.S. gold futures for December
delivery <GCZ0> fell $16.20 an ounce to $1,387.10.
The precious metal has retreated swiftly from the record
$1,424.10 an ounce it hit on Tuesday as the dollar's rebound
prompted selling of gold.
However, in the longer term the metal, which unlike other
commodities is widely seen as an alternative currency and a safe
store of value, could be supported by concerns over financial
market volatility, analysts said.
"This is a knee-jerk risk sell-off, and gold is getting
dragged down with the rest of the complex," said RBS Global
Banking & Markets analyst Daniel Major.
But he said support remained for the precious metal which
could override this effect. "We have seen fluctuations in the
correlation between gold and the dollar this week. Gold was
still pushing forwards regardless of the stronger dollar."
"In the near term... I think there is a sufficient amount of
peripheral European concern that would bring out some of the
safe-haven status of gold," he added.
The euro recovered after hitting six-week lows against the
dollar on Friday as EU leaders sought to reassure nervous
bondholders and on speculation, quickly denied, a rescue package
for Ireland was being hammered out. []
YIELDS EASE
Irish government bond yields fell on Friday after EU leaders
reiterated that holders of outstanding bonds would not be forced
to take losses in any debt restructuring. Bondholders remain
nervous, however. []
"As European sovereign debt falls under the spotlight again,
gold could benefit next week on an increase in wealth protection
demand," said Fairfax analyst Marc Elliott in a note.
G20 leaders drew a veil over their economic policy disputes
on Friday, agreeing to tackle tensions that have raised the
spectre of currency wars and giving the nod to countries that
have seen huge capital inflows to impose controls.
[]
Meanwhile major European stock markets were lower after a
weak session in Asia which notably saw the Shanghai composite
index <> fall 5 percent, its biggest one-day drop since
May, on talk of another Chinese interest rate hike. []
Gold priced in euros, sterling and Swiss francs also fell,
while the precious metal fell 3 percent at its session low in
Japanese yen terms.
On the physical side of the market, Indian gold traders
hunted for bargains after prices retreated from record highs,
stocking up for weddings in the world's biggest bullion
consumer. []
Interest in investment vehicles like exchange-traded funds
was soft, however, with holdings of the world's largest
gold-backed ETF, New York's SPDR Gold Trust <GLD>, falling by
just under 1 tonne on Thursday. []
Oil meanwhile tumbled 1.7 percent and base metals fell as
commodities came under pressure from investor caution and
speculation that China could be headed for another rate hike.
Other precious metals slipped sharply as commodities sold
off, with palladium down more than 4 percent, silver more than 3
percent and platinum more than 2 percent. []
Spot silver <XAG=> was bid at $26.89 an ounce against
$27.75, while platinum <XPT=> was at $1,711.49 an ounce against
$1,752 and palladium <XPD=> was at $693.22 against $709.72.
(Reporting by Jan Harvey; editing by Keiron Henderson)
