* Euro gains against dollar, still near 7-week low
* Ireland pledges to work with EU-IMF mission on banks
* China's gold consumption set to rise this year
(Updates prices)
By Amanda Cooper and Jan Harvey
LONDON, Nov 17 (Reuters) - Gold steadied on Wednesday as the
euro hovered near seven-week lows against the dollar and talk of
a Chinese rate rise kept commodities under pressure.
Spot gold <XAU=> was bid at $1,340.00 an ounce at 1615 GMT
against $1,339.80 late in New York on Tuesday. Earlier it
touched a low of $1,330.90 an ounce. Meanwhile U.S. gold futures
for December delivery <GCZ0> rose $1.70 to $1,340.40.
Gold has shed more than 6 percent since hitting a record
high at $1,424.10 as the rebound in the dollar has triggered a
torrent of selling across the commodities complex.
Rising concern over Ireland's ability to repay its debt has
pushed the euro to seven-week lows against the dollar, but the
greenback's strength is offsetting any potential safe-haven
flows into gold such as those seen in May, at least for now.
[]
Should gold end the day in the red, this will mark its
longest stretch of consecutive daily losses in five months, but
it has not suffered to the same extent as other raw materials.
"It's performed reasonably well in the correction relative
to, for example, some of the base metals. Gold is only off about
6.5 percent from the high. Compare that to something like zinc
<CMZN3>, for example, which has plunged and is now down about 20
percent from the recent highs," said Credit Suisse analyst Tom
Kendall.
"That reinforces the defensive qualities of gold and its
diversification benefits."
Bullion prices remain under pressure from weakness in
commodities overall, with oil and base metals being heavily sold
following talk China might raise interest rates to cool growth.
China said on Wednesday it would intervene to control
consumer prices if they rise too quickly, a move that would do
little by itself to tame inflation but could foreshadow harsher
monetary tightening. []
DOLLAR LINK
Gold is suffering from the strength of the dollar, with
which it usually maintains a negative relationship.
This inverse correlation has strengthened in the past two
days, after having weakened almost continuously for the past
month as concern about the euro zone has driven investors into
both gold and the dollar.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic on gold's negative correlation to the dollar
index <.DXY> click here:
http://link.reuters.com/gep85q
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While at present pressuring gold via its impact on the
currency markets, euro zone sovereign risk could prove a big
support factor for gold. Ireland has pledged to work with a
European Union-IMF mission on steps to help a stricken banking
sector. []
When worries over euro zone debt levels first came to the
fore in the second quarter, it sparked a surge in investment
demand for gold and pushed prices to then-record highs as
investors fretted about the stability of paper currencies.
"We have all grown up with this blind faith in paper money,
which is going to crumble," said Edward Ennis, head of
commodities at Rothschild Bank in Zurich.
"Gold and silver will start to reappear, and we are going to
see a lot of strength in these markets to come."
While those investment flows eased in the third quarter,
gold demand has been lifted by a recovery in jewellery buying in
the key Indian market and robust growth in Chinese consumption,
the World Gold Council said on Wednesday. []
The Hong Kong Census and Statistics Department said on its
website that the gold flow from Hong Kong to mainland China in
the first nine months of 2010 more than doubled from a year
earlier to 88.06 tonnes. []
Silver <XAG=> was at $25.80 an ounce against $25.47, while
platinum <XPT=> was at $1,633.99 against $1,638.50 and palladium
<XPD=> was at $651.72 against $639.47, having recovered from a
session low at $623.75.
(Additional reporting by Laura MacInnis in Geneva; Editing by
Jane Baird)
