* Gold flat in dollars, up in euros as euro struggles
* Ireland bailout agreed in principle
* Holdings of silver in largest silver ETF hit record
(Updates throughout with comment, refreshes prices)
By Amanda Cooper
LONDON, Nov 22 (Reuters) - Gold pared gains in dollar terms
on Monday, as optimism over Ireland's request for financial aid
was overtaken by concern about possible contagion to other euro
zone nations, to weigh on the euro.
The pick-up in the dollar undermined demand from investors
for perceived safe-haven assets such as gold, which tends to
struggle if the U.S. currency strengthens. []
EU officials said Ireland may receive the first tranche of
an emergency bailout in January and its debt problems are
unlikely to spread to other euro zone nations, although
Ireland's Green Party pulled the plug on the unpopular coalition
government by calling for a national election. []
Back in May, when the problems surrounding the euro zone's
debt burden became apparent, gold's traditional link to the U.S.
dollar broke down as investors sought an alternative to the
euro, although the same phenomenon has not materialized with
this recent resurgence of concern over Europe's finances.
"These periods of ... deflationary risks as opposed to
inflationary risks ... you're going to see them over the near-
to medium-term and that will create opportunities for investors
to step into precious metals," said Deutsche Bank analyst Daniel
Brebner.
"Now, if it is significant, or severe risk aversion, you
could argue gold could outperform a lot of different assets," he
added. "It may underperform the dollar so it may fall in dollar
terms."
Spot gold <XAU=> traded flat at $1,353.60 an ounce by 1433
GMT, having earlier risen by as much as 0.77 percent to a
session high of $1,364.55. U.S. gold futures for December
delivery <GCZ0> were last up $1.5 at $1,353.70.
Gold in euros <XAUEUR=R> was last up 0.3 percent at 991.79
euros an ounce, while gold in sterling <XAUGBP=R> was last up
0.2 percent at 846.95 pounds an ounce.
Risk aversion alone does not always drive investors into
precious metals, especially if the broader commodities complex
comes under pressure, sweeping bullion lower in the process, as
has been the case in the last three weeks. <.CRB>
Holdings of gold in the world's largest exchange-traded fund
rose for the first time in two weeks, indicating investors were
delving back into precious metals, albeit cautiously. []
While holdings of metal in ETFs rose last week, speculators
cut their holdings of gold futures, according to data from the
U.S. Commodity Futures Trading Commission last week.
Total open interest in gold futures held by non-commercial
players, which many in the market use as a gauge of speculative
activity, staged its largest weekly fall since late July and has
fallen in five out of the past six weeks.
"Much of the short-term froth is now dissolved -
particularly from the gold market - but that doesn't mean the
stage is set for a re-run of fresh highs," said UBS precious
metals strategist Edel Tully.
"With Thanksgiving approaching, U.S. investors in particular
may be inclined to reduce risk positions over the holiday
period," she added.
Meanwhile, China's steps to rein in inflation could dim
gold's appeal in the world's second-largest consumer after
India, but a drop in bullion prices from all-time high levels
were attracting purchases from other consumers in Asia, local
dealers said. []
Reflecting the concern among some investors about the rise
in the gold price against a backdrop of an improving global
economy, HSBC Global Asset Management said late last week it had
cut its gold allocation in its Absolute Return Fund in half.
"We have ... taken the prudent course of action and halved
our position in gold bullion to 6 percent to reflect the fact
that we remain bullish over the long term but acknowledge that
gold has run ahead of itself at a time when the diversification
benefits have become less obvious," wrote HSBC fund manager
Charlie Morris in a note to clients.
Silver <XAG=> rose by 0.2 percent, rallying for a fourth
successive day, after holdings of metal in the world's largest
silver-backed ETF hit another record high. []
Spot silver was last up at $27.23 an ounce, from $27.21 in
late trade in New York on Friday, having risen by nearly 9
percent in the last five trading days.
Platinum <XPT=> was last down 0.5 percent on the day at
$1,654.49 an ounce, while sister metal palladium <XPD=> was up
0.4 percent at $701.22 an ounce, set for a fourth consecutive
day of increases.
(Reporting by Amanda Cooper; Editing by Michael Taylor)
