--Comex February gold up $2.30, or 0.1%, at $1,600.20 a troy ounce
--Gold prices draw strength from a steady euro which trades above $1.30 despite pressure
--Thin pre-holiday trading volumes add to gold's strength
--Kim Jong Il's death draws attention away from euro zone's debt problems
By Tatyana Shumsky
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Gold advanced back above the psychological threshold of $1,600 a troy ounce as investors saw a steadier euro and as trading volumes eased ahead of the upcoming seasonal holidays.
The most actively traded contract, for February delivery, was recently up $2.30, or 0.1%, at $1,600.20 a troy ounce on the Comex division of the New York Mercantile Exchange.
The December-delivery contract was up $4.80, or 0.3%, at $1,600.40 a troy ounce.
Gold drew strength from the euro, which continues to trade above the psychologically important $1.30 level despite facing some pressure from the dollar.
Traders are closely watching Europe's debt and currency markets after Fitch Ratings on Friday cut France's credit outlook to negative from stable. Fitch's decision indicates a 50% chance that Europe's second-largest economy could lose its coveted triple-A rating over the next two years. The ratings firm also placed Spain and Italy on negative watch. Also Friday, Moody's Investors Service cut Belgium's sovereign credit rating by two notches to Aa2.
Gold prices are proving resilient in the wake of last week's 7% decline. Gold plummeted below $1,600 and hit a five-month low last week as weakness in the euro, which fell below $1.30 for the first time since January, sparked a rush to dollar-denominated cash.
Gold prices also caught a boost from reports that South Korean leader Kim Jong Il has died, which pulled trader attention away from focusing on Europe's debt problems.
"Korea is back in the headlines, giving investors more to worry about besides the euro zone," said George Gero, vice president with RBC Capital Markets Global Futures.
Thin pre-holiday trading volumes are likely giving gold prices a boost as individual trades tend to have an outsized impact on price discovery when trading volume is low. Market participants are moving to the sidelines ahead of the Christmas and New Year holidays.
Meanwhile, the volume of physical gold traded by members of the London Bullion Market Association rose 0.5% to a daily average of 21.4 million troy ounce in November, from 21.3 million troy ounce in October. At the same time the average fixing price rose 4.3%, boosting the value of these transfer by 4.8% to $37.3 billion, the LBMA said.
