* Gold, silver retreat from highs; oil down on Gaddafi
* Greece downgrade puts euro zone debt back in focus
* Gold/silver ratio hits 13-year low below 40
* Coming up: Gold traders eye $1,450 all-time high
(Adds graphic)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, March 7 (Reuters) - Gold pared gains after
rallying to a record high on Monday, as crude oil prices
sharply pulled back and safe-haven buying eroded amid
speculation that Libyan leader Muammar Gaddafi was seeking a
deal to leave the country.
Silver gained more than 1 percent, having earlier touching
a 31-year high on strong physical demand and short-term supply
tightness. Silver's outperforming over bullion sent the
gold-silver ratio to a 13-year low under 40.
Precious metals rallied earlier in the session on news that
Gaddafi's warplanes counter-attacked against rebels, but prices
retreated on unverified rumors of a deal involving Gaddafi
leaving Libya. []
"It's just consolidation and profit-taking," said Bruce
Dunn, vice president of bullion dealer Auramet Trading. "The
dollar strengthened, oil came off almost $2 a barrel, and
that's why the gold market also came off."
"With all the problems in Africa and the Middle East, we
are likely to see huge price spikes and high volatility. I
don't see that changing anytime soon," Dunn said.
Gold was also dragged lower on margin-type selling as Wall
Street fell 1 percent, and as the euro was little changed
against the dollar after having earlier hit a four-month high
as expectations of a euro zone interest rate hike next month
faded. []
Spot gold <XAU=> hit a record $1,444.40 an ounce as
violence flared in Libya and after a downgrade of Greece's
credit rating by Moody's reignited euro zone sovereign debt
worries, which helped fuel a bullion rally last year.
[]
Gold rose 0.4 percent to $1,434.50 an ounce by 3:10 p.m.
EST (2010 GMT), while U.S. gold futures for April delivery
<GCJ1> settled up $5.90 an ounce to $1,434.50. Gold prices in
London had risen further after U.S. futures settled on Friday,
resulting in a sharper gain in U.S. prices on Monday as they
caught up.
Gold's volume was higher than its previous session's and
was largely in line with its 30-day average, preliminary
Reuters data showed.
Silver <XAG=> gained 1.3 percent to $36.08 an ounce. The
metal rose to its highest since early 1980 in earlier trade at
$36.70 an ounce.
The gold/silver ratio fell below 40:1 for the first time
since February 1998, the weakest since billionaire Warren
Buffett bought 130 million ounces of silver between 1997 and
1998.
(Graphic: http://link.reuters.com/vuk48r)
GOLD/OIL LINK TIGHTENS
The positive correlation between gold and oil have
tightened of late, as political instability in the Middle East
and North Africa stoke energy supply worries, confirming
bullion's status as an inflation hedge. In the past 12 months,
however, the gold-oil link remained largely erratic.
(Graphic of oil-gold correlation:
http://link.reuters.com/dek48r)
Other commodities including industrial metals led by copper
and grain futures also tumbled, largely following oil's
weakening.
Since late January, gold has gained 10 percent, while oil
soared more than 25 percent over the same period on concern
that chaos in Libya, an oil exporter, could lead drive up
global energy prices.
"The geopolitical risk premium is clearly reflected in the
gold price," said Robin Bhar, an analyst at Credit Agricole.
"The violence (has) intensified which does prompt suggestions
of civil war in Libya."
Gold is building on a fifth-consecutive weekly gain last
week, triggered by unrest across the Arab world, which unseated
leaders in Tunisia and Egypt before spreading to Libya,
Bahrain, Yemen, Oman, and most recently the world's largest oil
producer Saudi Arabia.
Saudi security forces detained at least 22 minority
Shi'ites who protested last week against discrimination,
activists said on Sunday, as the kingdom tried to keep the wave
of Arab unrest outside its borders. []
Platinum <XPT=> dropped 1.3 percent to $1,817.24 an ounce,
while palladium <XPD=> lost 2.4 percent to $790.
Prices at 3:10 p.m. EST (2010 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1434.50 5.90 0.4% 0.9%
US silver <SIK1> 35.865 0.538 0.0% 15.9%
US platinum <PLJ1> 1820.40 -17.50 -1.0% 2.4%
US palladium <PAM1> 790.10 -19.70 -2.4% -1.6%
Gold <XAU=> 1436.50 4.55 0.3% 1.2%
Silver <XAG=> 36.05 0.44 1.2% 16.8%
Platinum <XPT=> 1816.24 -24.76 -1.3% 2.8%
Palladium <XPD=> 790.00 -19.50 -2.4% -1.2%
Gold Fix <XAUFIX=> 1437.50 0.50 0.0% 1.9%
Silver Fix <XAGFIX=> 36.60 217.00 6.3% 19.5%
Platinum Fix <XPTFIX=> 1838.00 0.00 0.0% 6.2%
Palladium Fix <XPDFIX=> 810.00 4.00 0.5% 2.4%
(Additional reporting by Rebekah Curtis in London; Editing by
Lisa Shumaker)
