PRECIOUS-Gold rises as dollar loses out to euro

(Updates with comment, refreshes prices)

 * Greece, Italy move closer to enacting austerity measures

 * Euro zone crisis far from over, should support longer term

 * Spot gold technical signals mixed

 By Maytaal Angel and Amanda Cooper 

 LONDON, Nov 11 (Reuters) - Gold rose on Friday in line
with a pick-up in the euro, which gained on the back of investor
optimism that new governments being formed in Italy and Greece
will swiftly enact austerity measures in a bid to stave off the
region's debt crisis. 

 Italy approved austerity measures needed to reduce its debt
burden and regain the confidence of capital markets, which this
week have pushed the yields on its benchmark 10-year bonds into
what economists perceive as a "danger zone" above 7.0 percent. 

 Spot gold rose 0.7 percent to $1,770.79 an ounce by
1525 GMT and was on course for a third straight week of rises
with a 1.0 percent gain. 

 U.S. gold rose 0.8 percent to $1,775.00. 

 "Gold is starting to consolidate above $1,750. For
sure, there will be more profit-taking from those people that
went long ... it could come off to $1,705 but I think we will
settle here for a while," said VTB Capital analyst Andrey
Kryuchenkov. 

 "The downside in gold is more protected because that is well
supported at the moment," he said, adding: "The broader market
clings to any sort of good news and to anything that is mildly
positive. What the FX and bond markets are telling us right now,
with Italian 10-year yields, and the spreads of France and Italy
versus Bunds, coming off is that there is a bit of improvement
in sentiment." 

 Italy has overtaken Greece as the main focus of the euro
zone debt crisis this week, with yields on its benchmark 10-year
bonds rising on Wednesday as high as 7.5 percent, which is
considered to be an unsustainable level.  

 They have since retreated below 7 percent, though investors
remain concerned that Euro zone's third-largest economy could
buckle under its 2 trillion euros of debt. Unlike Greece, Italy
is too big to bail out. 

 In Greece, the prime minister designate, Lucas Papademos,
will name a new crisis cabinet to roll out austerity plans.
  

 "GOOD FOR GOLD"   

 "The European Central Bank will have to create more money to
assist the debt burden in Europe, and that will be good for
gold," said Standard Bank analyst Walter de Wet, who said he
expected the gold price to rise to $2,000 an ounce. 

 Increasing liquidity can aggravate price pressures, making
gold more attractive as an asset seen to hold its value better
than paper currencies during times of high inflation. 

 "It is still unclear whether a new government in Italy will
be able to successfully consolidate its budget without external
help. Gold should therefore continue to profit from the
persisting high uncertainty," said Commerzbank in a note. 

 The euro was slightly higher on the day, changing hands at
$1.3641 and staying above a one-month low of $1.3484
touched on Thursday. For the week, the euro is still down about
1.5 percent.  

 Investment flows into gold-backed exchange-traded funds
continued this week. SPDR Gold Trust, the world's largest
gold ETF, reported a fifth straight day of gains in its holdings
-- reaching 1,268.666 tonnes by Nov. 10, the highest since late
August.  

 In other precious metals traded, spot platinum rose
0.8 percent to $1,631.24 an ounce, spot palladium rose
nearly 2 percent to $655.22, tracking a rebound in industrial
metals.  

 Silver rose 0.7 percent to $34.33 an ounce. 
 
 (Editing by James Jukwey)

http://in.reuters.com/