US MIDDAY: gold climbs

Gold rose to a seven-session high on Tuesday, as rising tensions on the Korean peninsula and mounting worries over a European debt crisis prompted investors to buy both the metal and the US dollar as safe havens. Gold traded lower through much of the European day on selling pressure related to expiring options at the $1,370 strike. Gold broke higher as traders saw heightened risks in both Europe and the Koreas, with some traders appearing to target the $1,400 mark.
"Gold's up on sovereign risk issues, worries over Ireland, and also the Korean incident, which prompted investors to buy gold and the dollar simultaneously, and that's why the US bond yields are falling," said James Steel, chief commodity analyst at HSBC.US gold futures rose 1.6 percent to $1,380.10 in active trading. With risk aversion running high, the typical inverse correlation to the dollar collapsed, with the one-day average hourly gold/dollar correlation turning positive for the first time since September, data showed.
North Korea fired artillery shells at South Korea, and investors seeking safety pushed the dollar up by more than 1 percent against a basket of major currencies, while gold rose 1 percent to $1,380 at 12:53 pm EST (1753 GMT).
Spot silver fell 0.8 percent to $27.59 an ounce amid unusually active futures trading. Holdings of metal in the iShares Silver Trust, the world's largest physically backed exchange-traded fund, hit a record high.
COMEX gold option floor trader Jonathan Jossen said futures prices rose slightly on expiration of the popular COMEX December options, whose open interest was the highest among the $1,350 calls and $1,400 calls. A common gauge for risk, the CBOE Volatility Index jumped 15 percent as rising tensions in the Korean peninsula added to worries about global economic conditions.
Speculators in New York have cut their exposure to gold futures by 4 million ounces in the last month and holdings of gold in the world's largest bullion-backed exchange-traded fund, the SPDR Gold Trust, have fallen by 1.5 percent.
With the US Thanksgiving holiday this week, investors are watching for a batch of data, as well as minutes from the Federal Reserve's meeting on November 2-3, where the Fed decided to launch its $600 billion bond buyback program. Platinum fell by 0.4 percent to $1,654.24 an ounce, while palladium was down by 1 percent at $684.22.