* Respite from rising Treasury yields
* Physical demand emerges
* Coming up: U.S. initial weekly jobless claims; 1330 GMT
(Updates throughout with comment, details; pvs SINGAPORE)
By Amanda Cooper
LONDON, Dec 9 Reuters) - Gold stabilised on Thursday, as
U.S. Treasury yields fell for the first time in three days, a
day after a sharp sell-off that knocked the bullion price from a
record high to one-week lows.
This week's quarter-point rise in 10-year Treasury yields to
six-month highs has boosted the dollar and unnerved investors
over the near-term impact of Washington's tax plans on domestic
finances and inflation.
As the dollar has benefitted from greater yield appeal and
the perception that the U.S. government's efforts will result in
longer-term growth, gold has come under pressure, and is set for
its largest weekly fall since late October, having hit record
highs earlier this week.
Spot gold <XAU=> was last quoted at $1,381.30 an ounce at
1034 GMT, little changed on the day, having fallen for two
consecutive days. U.S. February gold futures <GCG1> were down
$0.50 an ounce at $1,382.90.
"Dollar strength is certainly hurting gold and also I think
ongoing signs that things are steadily improving and yes, the
(tax) package of Obama's is a concern because maybe they're
spending money they don't have, but it will help activity," said
Citi analyst David Thurtell.
"If countries in the peripheral euro zone and the U.S. can
show that they have a long-term plan to fix things, markets will
become much more accepting of short-term spending," he said.
The so-called opportunity cost of owning gold -- the yield
investors forfeit for holding a non-interest bearing asset --
rises in tandem with bond yields and investors have seen that
cost automatically spiral this week as Treasuries have fallen.
Gold hit a record high of $1,430.95 on Tuesday, fuelled by a
flurry of fund-buying ahead of the year-end and a resurgence in
risk aversion stemming from Europe's deepening debt crisis,
which has pummelled the government bonds of the euro zone's most
economically fragile members.
With the 3 percent decline seen over the last three days
however, physical demand has resurfaced, particularly in Asia,
where premiums for physical delivery in Hong Kong held steady,
while scrap supply was muted.
"Interestingly we don't see too much gold scrap falling back
into the market, after price hit record high. Everybody is still
bullish," said Dick Poon, manager of precious metals at Hareaus
in Hong Kong.
Poon said physical buying from manufacturers has subsided,
while investors, betting on further price rise, continued to buy
on dips.
"Stabilization Thursday has been due in large part to
impressive physical demand, with very decent buying across Asia
yesterday," wrote UBS strategist Edel Tully in a note.
"In India alone, our physical sales made Wednesday one of
the top ten days this year, with demand accelerating once gold
fell below $1,390. This should provide longs with some comfort."
Reflecting the lack of appetite for gold this week was a
fourth successive decline in holdings of metal in the SPDR Gold
Trust <GLD>, the world's largest exchange-traded fund backed by
physical bullion. []
Spot silver <XAG=> rose 0.2 percent to $28.36 an ounce,
after declining to a one-week low of $27.96 in the previous
session.
Platinum <XPT=> eased modestly, down 0.2 percent on the day
at $1,678.49 an ounce, while palladium <XPD=> rose 1.4 percent
to 734.22, taking some heart from the rise in other industrial
commodities such as crude oil and base metals. [] []
(Additional reporting by Rujun Shen in Singapore; Editing by
Alison Birrane)
