By Amanda Cooper LONDON, Nov 10 (Reuters) - Gold rallied by 0.5 percent on Wednesday, after its choppiest trading session in six months the day before, as concerns about euro zone debt reignited safe-haven buying, while silver pared Tuesday's 3 percent drop. Spot gold rose 0.6 percent 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 sell-off in U.S. silver futures caused by a 30 percent hike in margins as well as a stronger dollar. [ID:nN0999567] Supporting gold further was investor discomfort over debt burdens in the euro zone 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, although Middle East buying protected the euro from a more aggressive sell-off. "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." BACK TO GOLD Investors have been delving into gold once more as evidenced by holdings of bullion in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, holding steady over the past couple of weeks, just above 1,290 tonnes. [GOL/SPDR] "Gold tends to be pretty resilient and finds a reason to bounce back," said Darren Heathcote, head of trading at Investec Australia. Gold priced in euros XAUEUR=R was last up 0.6 percent at 1,015.72 euros, while Swiss franc-priced bullion XAUCHF=R was up nearly 1 percent at 1,358.07 francs. Currency tensions are high on the agenda at this week's G20 summit of advanced and developing nations in Seoul, where negotiators sought on Wednesday to gloss over bitter divisions on global economic policies after a day of heated arguments. [ID:nN09125341] World Bank President Robert Zoellick said on Wednesday he was not advocating a return to a gold standard, days after he suggested the world's largest nations consider gold as an indicator to help set foreign exchange rates. [ID:nSGE6A904Z] The dollar index .DXY rose to its highest in two weeks, largely as a result of earlier pressure on the euro. Usually a stronger dollar suppresses gold prices, but this traditional inverse relation reached its weakest in almost two months on Wednesday. In top world gold producer China, plans to deregulate the gold market are likely to boost imports of the precious metal to satisfy investor demand, putting the country on course to overtake India as the biggest global consumer in a few years. [ID:nSGE6A201W] Meanwhile, silver was the top performer of the precious metals complex with a 3.5-percent rise, following its most volatile trading session since early 2009 the day before. The CME Group, which owns the COMEX exchange, said it would raise the margin requirement for silver futures to $6,500 a contract from $5,000 previously, implying a leverage ratio of 21.5, to curb some of the volatility that has developed. "It is important to put yesterday's price action into context: despite its violence, Tuesday's pullback only brought precious metals prices back to Monday's levels and should therefore be seen as a clearing-out of intraday froth," said UBS precious metals strategist Edel Tully, in a note. "Pullbacks aren't a bad thing - they test the conviction of existing longs and the eagerness of those waiting on the sidelines." Silver was at $27.76 an ounce, up by more than 3 percent on the day, while holdings of metal in the iShares Silver Trust (SLV), the world's largest silver ETF, hit a new record high, indicating strong investor demand.

Source