* Dubai's $10 bln bailout weighs on dollar
* Traders eye last Fed policy meeting of 2009
* London, New York ETF holdings sank last week
(Adds comment, updates prices)
By Jan Harvey
LONDON, Dec 14 (Reuters) - Gold prices rose 0.7 percent in
Europe on Monday after news that Dubai had averted a debt
default sharpened appetite for risk, pressuring the dollar and
boosting higher-yielding currencies such as the euro.
Spot gold <XAU=> was bid at $1,121.60 an ounce at 1527 GMT,
against $1,113.85 late in New York on Friday. U.S. gold futures
for February delivery <GCG0> on the COMEX division of the New
York Mercantile Exchange rose $1.30 to $1,121.20 an ounce.
Gold is awaiting fresh direction from the wider markets
after posting a sharp fall last week, which depressed prices
nearly 10 percent from the record $1,226.10 an ounce they hit in
early December.
"We remain dollar bearish, so the gold price rally could
resume towards the very end of the year," said Tobias Merath,
head of commodity research at Credit Suisse.
"Also, gold has a positive seasonal effect in January, so
usually the gold price does well at the outset of the year," he
noted. "But from there, we would expect some headwinds."
Prices were supported on Monday by weakness in the dollar
versus the euro as fears over Dubai's debt eased, though the
U.S. currency recovered some early losses. []
Dubai said on Monday it had received $10 billion from fellow
UAE member Abu Dhabi to head off a bond default. []
The announcement lifted assets perceived as higher risk,
such as stocks and higher-yielding currencies, and pressured the
dollar.
"Stock markets have recovered and that indicates that at
least a little more risk taking is coming back into the market,"
said Peter Fertig, a consultant at Germany's Quantitative
Commodity Research.
"That is usually positive for gold via the U.S. dollar,
because more risk taking means investors are shifting out of the
safe-haven dollar into risky assets."
FED EYED
Traders are awaiting comments from the Federal Reserve on
the state of the U.S. economy later this week. The Fed is due to
complete its final policy meeting of the year on Wednesday.
The U.S. central bank is likely to keep interest rates
unchanged near zero, but the focus will be on the accompanying
statement and whether the Fed adds to recent hints that rates
will remain depressed for the foreseeable future.
A change in investment trends also unsettled some analysts.
Holdings of the world's largest gold exchange-traded fund fell
13.7 tonnes in the week to Friday, reflecting a 4 percent dip in
the price of spot gold in the same period. []
London's ETF Securities said holdings of its gold-backed
exchange-traded products fell just over 38,000 ounces or 0.5
percent last week, while Zurich Cantonal Bank's gold ETF saw an
outflow of 64,635 ounces or 1.3 percent.
"A recent switch in investment activity to futures markets
as purchasing of exchange-traded product buying has slowed ...
(suggests) that the risk of liquidation has grown since futures
holders tend to be less committed than ETP buyers," Barclays
Capital said in a weekly note.
Non-commercial net long U.S. gold futures positions hit
record highs recently but a weekly report by the U.S. Commodity
Futures Trading Commission showed they fell to 254,429 lots in
the week to Dec. 8 from 259,064 lots. []
Silver <XAG=> was bid at $17.22 an ounce against $17.11,
tracking gains in gold. Platinum <XPT=> was at $1,438.50 an
ounce against $1,426, while palladium <XPD=> was at $364.50
against $357.50.
"With the gold:silver ratio at 65...silver remains a
compelling buy at these levels and will likely be the surprise
outperformer in 2010, as it was in 2009," bullion dealer
GoldCore said in a note.
(Editing by Sue Thomas)
