* Gold, silver reverse early gains to dive as dollar rises
* Euro zone debt back in focus, G20 uncertainty cited
* Silver futures volume reaches all-time high
* Coming up: G20 meeting begins Wednesday
(Recasts, updates prices, market activity)
By Frank Tang
NEW YORK, Nov 9 (Reuters) - Gold's rise to a fourth
consecutive record high unraveled late on Tuesday after an
extended midday gain in the dollar and an increase in silver
futures margins sparked a wave of profit-taking.
After gaining early in the session on safe-haven buying,
fueled in part by concerns about Irish and Portuguese debt,
gold prices reversed course in the U.S. afternoon to fall back
below $1,400, down more than 1 percent on the day.
Silver reversed from a 30-year high in record high trading
volume, falling in tandem with oil and grains.
Without a clear trigger for the mid-session gains in the
U.S. dollar index <.DXY>, which was up more than 1 percent by
3:52 p.m. EST (2052 GMT), dealers began to look closer at COMEX
silver, where preliminary trading volume was over four times
its average.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Greek, Irish bond yield spread http://r.reuters.com/tuk54q
G20 battle lines: http://r.reuters.com/jux34q
Basel III; rule reshaping: http://r.reuters.com/zys68p
Gold price performance: http://link.reuters.com/juz44q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Some traders said a rise in margins to $6,500 a contract
from $5,000 had aided the sell-off in a market that was due for
a correction after outperformed gold in the past few months.
"The sell-off started because the market had gone too far
too fast," said Frank McGhee, head precious metals trader with
Integrated Brokerage Services LLC in Chicago. "The margin
change added insult to injury," he added, but said it was not
the primary factor driving the after-hours sell-off.
Gold had earlier risen in tandem with the dollar for a
second straight day, as investors poured into both the metal
and the U.S. currency as safe havens. Analysts said gold's
unusual positive link with the greenback was similar to what
happened earlier this year amid eurozone sovereign debt fears.
The euro <EUR=> struggled for a third straight session,
swinging from gains to losses as investors worried about Irish
and Portuguese debt and hedged sizable bets against the U.S.
dollar. []
Gold has risen as much as 8 percent since just before the
Federal Reserve detailed its plans last Wednesday to buy $600
billion worth of Treasuries to revive the economy, but the
Fed's actions also stoked inflation fears.
Spot gold <XAU=> scaled a record at $1,424.10 an ounce, but
then fell by 1.7 percent to $1,386 in late New York trade.
U.S. gold futures for December delivery <GCZ0> settled up
$6.90, or almost 0.5 percent, prior to the day's reversal. Spot
silver <XAG=> surged as much as 6 percent to a 30-year high of
$29.33, but later fell by more than 3 percent to $26.80 in
exceptionally volatile trade even by silver market standards.
COMEX silver futures volume was above 191,000 lots,
preliminary Reuters data showed, breaking the previous record
of 127,890 lots set in 1976. The benchmark December contract
<SIZ0> settled up $1.474 at $28.906 an ounce.
The premium that investors are demanding to hold Irish and
Portuguese government debt shot to record highs on concern
about funding and potential default. This prompted European
investors to seek a safe-haven investment such as gold.
[] []
Also on the radar is this week's G20 summit. Officials from
Germany, Brazil, China and South Africa are among those
expressing concern that the Fed's policy could weaken the
dollar and drive up commodity prices. []
Gold priced in euros <XAUEUR=R> has rallied by more than 7
percent in the last five sessions, rising to its highest since
late June this year.
Prices at 3:29 p.m. EST (2039 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1410.10 6.90 0.5% 28.6%
US silver <SIZ0> 28.906 1.474 0.1% 71.6%
US platinum <PLF1> 1809.60 38.50 2.2% 23.0%
US palladium <PAZ0> 742.65 31.75 4.5% 81.6%
Gold <XAU=> 1390.30 -18.79 -1.3% 26.8%
Silver <XAG=> 26.80 -0.89 -3.2% 59.1%
Platinum <XPT=> 1757.00 -14.50 -0.8% 19.9%
Palladium <XPD=> 687.72 -17.50 -2.5% 69.6%
Gold Fix <XAUFIX=> 1421.00 4.75 0.3% 28.7%
Silver Fix <XAGFIX=> 28.55 183.00 6.8% 68.0%
Platinum Fix <XPTFIX=> 1786.00 6.00 0.3% 21.8%
Palladium Fix <XPDFIX=> 730.00 9.00 1.2% 81.6%
(Additional reporting by Barani Krishnan and John Parry in New
York and Amanda Cooper and Pratima Desai in London; Editing by
David Gregorio and Lisa Shumaker)
