* Gold rises after US Treasury prices bounce after auction
* Dollar cuts initial gains, lifting gold
* Coming up: U.S. consumer sentiment due Friday
(Recasts, updates with new comment, market activity, adds NEW
YORK byline/dateline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, Dec 9 Reuters) - Gold prices rose in
choppy trade on Thursday, rebounding after the previous
sessions' losses, helped by a bounce of U.S. Treasury prices
and as a dollar rally lost momentum.
Benchmark Treasury yields fell from a six-month high after
a successful 30-year bond auction, retracing the dramatic
sell-off earlier this week fueled by inflation and deficit
fears on a deal to extend federal tax cuts. []
The dollar also erased initial gains as Treasury yields
fell, after rising in the previous sessions on hopes of
improving U.S. economic growth on the tax stimulus. []
Gold has reasserted its role as a safe haven after the
combined effect of rising U.S. short-term interest rates and a
stronger dollar prompted profit-taking in the past two days.
"If people don't have confidence in the value of the
currency, it doesn't matter if Treasury yields go up. Because,
if the currency is going to lose value, the yield has to go up
significantly to compensate for any ... declining value of the
dollar," said Miguel Perez-Santalla, vice president of sales of
Heraeus Precious Metals Management in New York.
"People are not bailing out on gold to get into Treasuries.
Gold right now is still the place for safe haven," he added.
Renewed euro zone worries benefited gold after ratings
agency Fitch downgraded Ireland's sovereign debt rating after
an opposition party there said it would vote against a bailout
package for the debt-laden country. []
Spot gold <XAU=> rose 0.7 percent to $1,391.65 an ounce at
1:06 p.m. EST (1806 GMT). U.S. February gold futures <GCG1>
rose $10.10 to $1,393.30 an ounce.
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.
"We suggested recently that higher interest rates pose one
of the more significant potential headwinds for spot gold
prices, and the sharp rise in yields to six-month highs does
appear to be slowing gold's recent ascent," said Nic Brown,
Natixis commodities strategist.
Gold lost some safe-haven appeal this week as, for the
first time in weeks, euro zone debt concerns were placed on the
back burner and investors focused on U.S. economic fundamentals
in a thinning market.
However, rebounding Treasury prices prompted investors to
re-focus on economic uncertainty due to widening U.S. deficits
and sovereign debt worries.
"The bias is certainly towards risk-on again, and it's a
function of having a couple of points of (U.S. economic) growth
added on because of the extension of the ... tax cuts," said
Daniel Brebner, a strategist at Deutsche Bank.
"There's certainly lots of risk around. Debt is becoming an
issue in both Europe and the U.S., but right now the
macroeconomic policy is towards growth, and I think the market
is reflecting that."
NEAR RECORD
Gold hit its record $1,430.95 an ounce on Tuesday, fueled
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 pummeled the government bonds of the
euro zone's most economically fragile members.
With the 3 percent decline over the past 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.
Spot silver <XAG=> rallied 1.8 percent to $28.84 an ounce,
after declining to a one-week low of $27.96 on Wednesday.
Platinum <XPT=> fell 0.3 percent to $1,676 an ounce, while
palladium <XPD=> rose 2.1 percent to $739.22, taking some heart
from the rise in other industrial commodities such as crude oil
and base metals. [] []
Prices at 1:09 p.m. EST (1809 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCG1> 1393.80 10.60 0.8% 27.1%
US silver <SIH1> 28.925 0.668 2.4% 71.7%
US platinum <PLF1> 1681.40 0.00 0.0% 14.3%
US palladium <PAH1> 742.90 13.95 1.9% 81.7%
Gold <XAU=> 1392.60 11.21 0.8% 27.0%
Silver <XAG=> 28.86 0.53 1.9% 71.4%
Platinum <XPT=> 1677.99 -2.75 -0.2% 14.5%
Palladium <XPD=> 739.47 15.50 2.1% 82.4%
Gold Fix <XAUFIX=> 1391.25 9.25 0.7% 26.0%
Silver Fix <XAGFIX=> 28.41 -61.00 -2.1% 67.2%
Platinum Fix <XPTFIX=> 1691.00 5.00 0.3% 15.3%
Palladium Fix <XPDFIX=> 746.00 9.00 1.2% 85.6%
(Editing by Walter Bagley)
