* Concerns over Ireland's debt levels linger
* Dollar index rises, euro under pressure from debt worries
* Caution abounds on wider markets, equities soften
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Nov 15 (Reuters) - Gold prices held below $1,370 an
ounce in Europe on Monday as concerns over euro zone sovereign
debt levels were offset by strength in the dollar.
Spot gold <XAU=> was bid at $1,364.50 an ounce at 1056 GMT,
against $1,366.35 late in New York on Friday. U.S. gold futures
for December delivery <GCZ0> fell $1.30 an ounce to $1,364.20.
The metal staged its biggest one-day fall since July 1 on
Friday, retreating from last week's record $1,424.10, on concern
the market had become overbought and as talk of a potential
interest rate rise in China knocked commodities sharply lower.
"The rise above $1,400 was probably premature and gold was
overbought. Right now, I wouldn't be surprised to see further
weakness on a lack of a new speculative buying," said
Commerzbank analyst Eugen Weinberg.
He said newly resurfacing worries over the stability of
certain euro zone economies, most notably Ireland, was
"definitely helping" the metal. "That is the reason why we are
not much lower."
A spike in the borrowing costs of peripheral euro zone
members over the past weeks has raised concerns about their
ability to cut debt. []
German government bond prices fell on Monday, however, as
some safe-haven flows were unwound on talk that Ireland may ask
the European Union for aid to manage its debt crisis. []
Ireland on Sunday did not rule out the possibility that it
might have to turn to Europe to deal with its debt crisis but
said that no application had been made for assistance yet.
[]
Concerns over Ireland and other euro zone economies
pressured the euro <EUR=> back towards last week's six-week low,
while the dollar index hit a six-week high, boosted by higher
U.S. Treasury yields. []
A stronger dollar typically weighs on gold, because it dents
interest in the metal as an alternative asset and makes it more
expensive for holders of other currencies.
RISK AVERSION EYED
When both gold and the dollar benefit from rising risk
aversion, as was seen at the height of the sovereign debt crisis
in the second quarter of this year, they can move together. This
may happen again if current euro zone debt fears worsen,
analysts said.
"Once the dust settles, there will be plenty of willing
buyers happy to move in on new lows," said VTB Capital analyst
Andrey Kryuchenkov in a note.
Caution abounded throughout the wider financial markets,
with stocks in Asia and Europe falling on fears that Ireland may
be forced to seek a financial rescue package. []
Oil prices held near $85 a barrel after falling more than 3
percent on Friday, and base metals prices were soft as concerns
over the prospect for a further Chinese interest rate hike
lingered. [] []
Silver <XAG=> was bid at $25.97 an ounce against $25.99,
having underperformed gold on Friday to fall more than 6
percent, its biggest one-day decline since early February.
Among other precious metals, platinum <XPT=> was at
$1,672.24 an ounce against $1,679, while palladium <XPD=> was at
$668.47 against $675.50.
Although it is underperforming other precious metals on
Monday, palladium remains on track to post the biggest gains of
the complex this year, on expectations that demand from
automakers and other industrial users will rise.
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For a graphic showing the relative price performance of key
commodities this year, click on:
http://graphics.thomsonreuters.com/F/10/CMD_PF.html
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(Reporting by Jan Harvey; Editing by Jane Baird)
