Gold retreats after Portuguese debt auction.

LONDON (Reuters) - Gold surrendered early
gains on Wednesday to edge lower as better risk
appetite after a well-received Portuguese bond
auction removed some safe-haven support,
though a softer dollar underpinned prices.
Spot gold was bid at $1,378.40 an ounce at 1423
GMT against $1,380.45 late in New York on
Tuesday, having earlier risen as high as
$1,386.90. U.S. gold futures for February
delivery eased $5.40 an ounce to $1,378.90.
The metal has clawed back some lost ground
after posting its biggest weekly loss since
mid-2010 last week, as a focus on more positive
U.S. data raised the prospect that U.S. authorities
may roll back quantitative easing measures
sooner rather than later.
However, in the absence of further bad news on
euro zone sovereign debt and U.S. growth, it
may struggle to build on last year's stellar
performance, analysts said.
"Gold is being held because of uncertainty, and
more than anything because of the fear factor
that has been evident since the financial crisis,"
said Credit Agricole analyst Robin Bhar.
"As the economy strengthens, as financial
markets normalize, and in the absence of any
further shocks... that is one driver for gold that
will start to unravel."
The precious metal took some support on
Wednesday from gains in the euro, which rose
0.4 percent versus the dollar after strong
demand at a Portuguese government debt
auction quelled some concerns over the nation's
funding problems.
However, persistent worries over the
indebtedness of smaller euro zone economies is
likely to continue to support gold, analysts said.
"With the euro still deep (in the) debt crisis and
physicals using every dip to buy the metal on
anticipation of an extended rise, there is little
downside possibility for gold, at least in this
quarter," said Pradeep Unni, senior analyst at
Richcomm Global Services.
"Weakness in the dollar and rising oil will add to
the...reasons to hoard gold."
OIL CLIMBS
Among other commodities, oil prices rose, with
Brent crude climbing to $98 on Wednesday,
their highest since October 2008, as production
shutdowns in Norway and Alaska raised
expectations of an accelerated tightening of
supplies.
U.S. crude also rose to within a few dollars of its
recent more than two-year high. Rising oil prices
can fuel demand for commodities as an asset
class, lifting gold.
Gold buying in India, the world's biggest
consumer of the metal, eased on Wednesday as
prices rose, but buying remains strong overall
across Asia, particularly in China. Premiums for
gold bars hit their highest in two years on
Tuesday.
"The impressive Chinese demand has been
fueled by lower prices, the upcoming New Year,
and also physical delivery against the February
Shanghai Futures Exchange contract," said UBS
analyst Edel Tully in a note.
"We expect the heavy Chinese demand to persist
for another 10 days or so, and turn very light in
the five or six days before the February 3
Chinese New Year, as seen in previous years."
Demand for gold to back exchange-traded funds
eased off further, meanwhile, with holdings of
the largest, New York's SPDR Gold Trust,
slipping just over 1 ton on Tuesday. Its holdings
have declined more than 9 tons since the start of
the year.
Holdings of the largest silver ETF, the iShares
Silver Trust, also declined, to 10,725.73 tons on
Tuesday from 10,786.51 tons.
Silver was bid at $29.51 an ounce against
$29.50. Platinum was at $1,788.74 an ounce
against $1,765.99, while palladium was at
$799.97 against $782.

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