LONDON Gold barely budged on Thursday, with trade subdued by the U.S. Thanksgiving holiday as safe-haven buying amid Europe's debt crisis and heightened tensions between North and South Korea supported recent gains.
The dollar, which traditionally has an inverse relationship with bullion, initially strengthened against the euro on renewed optimism about U.S. growth and persistent fears that Ireland's debt crisis might spill over into Spain and Portugal, but later slipped lower amid a pick-up in corporate demand.
Spot gold traded at the top of the day's narrow $7 range by 1900 GMT, up 40 cents or 0.03 percent, at $1,374 an ounce -- well below a record high of $1,424 just weeks ago.
U.S. gold futures rose $1 to $1,374 an ounce, with total COMEX trade of 61,000 lots -- about one-third of the norm.
Market watchers highlighted profit-taking and book-squaring ahead of Thursday's U.S. holiday and next month's Christmas break as a driver behind recent erratic trading. They predicted gold was likely to be range-bound for the rest of the week.
"It's been the quietest of days ... Gold seems to be consolidating generally and quite resilient," said Peter Hillyard, head of metals sales at ANZ Investment Bank, noting that the market was likely to be quiet until Monday.
"Investors still seem to be of the opinion in general that ... there's generally fear about global economies. There's generally a perception that there's not much you can trust to invest in other than commodities, and that's not just gold."
South Korea said it would increase the number of troops on islands near North Korea, while Pyongyang warned it would follow its bombardment earlier in the week with more shelling if its wealthy neighbor tried any provocations. [nL3E6MP0QZ]
Bullion barely reacted to news that Vietnam's central bank had granted additional quotas for domestic companies to import gold between now and the year-end, but dealers noted buying on dips from consumers in Hong Kong and Southeast Asia.
EUROPE CRISIS SIMMERS ON
In the currency market, the euro remained under pressure as jittery investors watched for signs that Ireland's debt crisis might be spilling over to other euro-zone members. The U.S. Dollar Index .DXY touched a two-month high, but later turned lower to dip 0.27 percent. <USD/>
German government bonds fell, pressured in part by the financial implications for core issuers of potential further euro zone bailouts, although the European Commission said there were no discussions on financial aid for more countries after Ireland asked for help.
Senior euro-zone officials also dismissed suggestions by some commentators that the single currency area could break up because of peripheral members' high debts and deficits and a loss of competitiveness with Germany.
German Chancellor Angela Merkel said she was more confident than earlier this year that the European Union will emerge stronger from the current crisis.
"Gold is finding reasonable interest on the dips from investors who are worried about currency debasement, possible inflation at a later stage and we're seeing reasonable physical buying out of India because the wedding season is under way," said Robin Bhar, an analyst at Credit Agricole, who saw gold trading between $1,365-$1,375 in the next two days.
"There are enough factors to keep it steady, but maybe some easing in concerns over the Koreas, over debt for now, particularly in Ireland ..., so maybe we're not seeing the sort of move toward $1,400 that perhaps we were thinking of a couple of days ago," he said, referring to this week's escalation of hostilities between North and South Korea.
In the United States, data on Wednesday showed initial jobless benefits claims fell to their lowest level in more than two years last week, while consumer spending rose for a fourth straight month in October, fuelling hopes the economic recovery is strengthening.
The rest of the precious metals complex was mixed on Thursday. Silver dipped a penny to $27.54 and platinum fell around $4 or 0.24 percent to $1,655.95 an ounce. Palladium rose 73 cents to $695.23.
(Editing by Jane Baird)