Gold Rallies Above $1,400


"Gold's inverse correlation to the dollar is starting to weaken."

Gold rallied by 0.5% on Wednesday, after its choppiest trading session in six months the day before, as concerns about eurozone debt reignited safe-haven buying, while silver pared Tuesday's 3 %drop.

Spot gold rose 0.6% to $1,400.05 an ounce by 1033 GMT, off the all-time peak of $1,424.10.

In its most volatile day of trade since May, gold dropped more than $30 from this peak in the previous session, triggered by a sharp selloff in U.S. silver futures caused by a 30% hike in margins, as well as a stronger dollar.

Supporting gold further was investor discomfort over debt burdens in the eurozone and the risk of funding problems or even potential default in certain peripheral nations.

The premium investors demand to hold Irish government debt hit a new euro lifetime high after clearer LCH.Clearnet increased margin requirements for Irish bonds, though Middle East buying protected the euro from a more aggressive selloff.

"With the dollar at the moment, gold is prone to those choppy moves," said VTB Capital analyst Andrey Kryuchenkov.

"The inverse correlation (to the dollar) is starting to weaken, which shows there is concern creeping in about the euro zone, and that should limit the downside in gold," he said, adding: "There are some willing buyers."

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