* Gold falls as drop in jobless claims boost risk appetite
* Support seen as focus still on euro zone debt crisis
* Gold's correlation to dollar erodes
* Coming up: S&P Case-Shiller home index due Tuesday
(Recasts, updates with comments, market activity, changes
dateline, previously LONDON)
By Frank Tang
NEW YORK, Nov 24 (Reuters) - Gold fell on Wednesday after
two days of gains, as encouraging U.S. jobless claims data
allayed some worries about growth due to fears Ireland's debt
crisis could spread to other euro zone economies.
New U.S. claims for unemployment benefits last week dropped
to their lowest level in more than two years while consumer
spending rose in October, pointing to a moderate strengthening
in economic activity. []
The better-than-expected drop in jobless claims provided an
incentive for bullion investors to square profits near the end
of the year, said Fred Schoenstein, a trader at Heraeus
Precious Metals Management.
"A lot of the euro zone worries that we are hearing have
already been priced in, and Ireland shows that it is ready to
make the situation better," weighing on gold's safe-haven
buying, he said.
In Ireland, the government unveiled a four-year austerity
plan on Wednesday imposing deep spending cuts and tax increases
to help pay for a bank crisis and meet the terms of an EU/IMF
rescue. []
Spot gold <XAU=> fell 0.2 percent to $1,373.55 an ounce by
12:38 p.m. EST (1738 GMT), down from an earlier session high at
$1,381.30, while U.S. gold futures <GCZ0> fell $4.30 to
$1,373.30.
COMEX gold futures volume was about 200,000 lots at 12:45
p.m., sharply lower than last year's 350,000 lots on the day
before the U.S. Thanksgiving Day holiday.
The euro climbed from a two-month low against the dollar on
Wednesday after losing over 2 percent in the last three
sessions as investors considered the move overdone in thin
trade in a holiday shortened week. []
While euro's strength against the dollar would normally
boost gold, the metal's traditional inverse relation to the
U.S. currency is at its lowest in two months, meaning it is
more likely to move in tandem with the greenback.
"I do think, however you look at it, it's going to have
rest and a consolidation for a while, and as we speak, it
trades (near) an all-time high in non-dollar terms," said
Charles Morris a fund manager at HSBC Global Asset Management.
Gold's negative correlation to the dollar reached its
weakest since mid-September as investors ditched the euro and
other risk-related assets such as stocks and corporate debt.
(Graphic of correlation: http://link.reuters.com/sen96q)
"Gold's been gritting its teeth in the last couple of days
and going contrary to what one might have expected with the
dollar move, and really that has to boil down to the
uncertainty," said Ole Hansen, a senior manager at Saxo Bank.
"We've got political risk from the Korea situation and then
more importantly ... people are talking about the potential of
the euro not surviving. I don't see that happening, but just
the fact that it is being talked about is enough to raise the
bar."
An exchange of military fire between North and South Korea
on Tuesday has further unsettled investors, putting Asian
stocks under pressure and encouraging a sweep into perceived
safe havens such as gold, government bonds and the Swiss franc.
[]
EUROPEAN DEBT CRISIS?
In terms of factors fueling a bid for safe-haven
investments, Michael Widmer, a strategist with Bank of
America-Merrill Lynch, said the euro zone debt crisis was the
dominant one.
Widmer said that history suggested that geopolitical
uncertainty tends to boosts gold, but it does not have a
sustainable impact on prices.
Silver <XAG=> fell less than 0.1 percent to $27.47, even as
holdings of silver in the world's largest physically-backed
exchange-traded fund rose to a third consecutive record high,
indicating robust demand for an alternate investment from gold.
[]
Platinum <XPT=> rose 0.6 percent to $1,656.24 an ounce,
recovering from two straight days of declines, while palladium
<XPD=> broke a two-day decline and rose 0.9 percent to
$692.72.
Prices at 12:46 p.m. EST (1746 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCZ0> 1372.40 -5.20 -0.4% 25.2%
US silver <SIZ0> 27.480 -0.092 -0.3% 63.1%
US platinum <PLF1> 1660.70 3.00 0.2% 12.9%
US palladium <PAZ0> 695.40 4.30 0.6% 70.1%
Gold <XAU=> 1372.85 -3.35 -0.2% 25.2%
Silver <XAG=> 27.46 -0.02 -0.1% 63.1%
Platinum <XPT=> 1652.70 9.00 0.5% 13.0%
Palladium <XPD=> 690.70 4.23 0.6% 70.3%
Gold Fix <XAUFIX=> 1372.50 -3.75 -0.3% 24.3%
Silver Fix <XAGFIX=> 27.41 10.00 0.4% 61.3%
Platinum Fix <XPTFIX=> 1662.00 5.00 0.3% 13.4%
Palladium Fix <XPDFIX=> 694.00 1.00 0.1% 72.6%
(Additional reporting by Amanda Cooper in London; Editing by
Lisa Shumaker)
