By Humeyra Pamuk

LONDON (Reuters) - Gold prices eased on Monday 30 November to around $1,170 per ounce even though currency fundamentals were favorable, with some investors opting for cash on residual wariness about Dubai's debt shock.

News that two Dubai flagship firms planned to delay repaying billions of dollars in debt renewed credit fears and initially pushed gold down 5 percent on Friday 27 November.

Traders said investors had sold gold in a knee-jerk response last week, after it hit record highs approaching $1,200 per ounce, to raise cash to cover losses in equities as well as oil and other commodities.

But they were not expecting a major sell-off with support seen coming from physical buying on dips, the prospect of further gold buying by emerging market central banks and bullion's appeal as a hedge against inflation.

Spot gold stood at $1,169.40 an ounce by 1244 GMT, versus $1,176.70 an ounce late in New York on Friday 27 November, when it tumbled to $1,136.80 an ounce, its lowest since November 20.

The dollar fell 0.36 percent versus a basket of major currencies .DXY. A weaker dollar normally makes dollar-priced gold more attractive for non-U.S. investors.

"There's still uncertainty in the market," Michael Kempinski, Commerzbank trader said. "There are still fears about the possible big impact from Dubai and people are still unsure about what to do."

United Arab Emirates stocks dived, and European shares were also down as investors waited for clarity on Dubai's plan to delay repaying billions of dollars in debt and government word on how it would tackle a crisis that has rattled global markets.

Tom Kendall, precious metals strategist at Mitsubishi, said gold was poised for further losses in the near term before resuming its rally, which saw it rise to an all-time high last week.

"After last week...gold doesn't look quite so bullish. It is hard to make a case to put fresh long positions and the charts are not looking particularly bullish."

Bullion is still on track for a 12 percent rise in November alone. The precious metal is only 2 percent below its record high of $1,194.90 an ounce. So far this year it has gained around 33 percent.

U.S. gold futures for December delivery were at $1,170.40 on the COMEX division of NYMEX, compared with $1,174.20 on Friday 27 November.

FRESH HIGHS?

But bullion's long-term appeal remains undimmed, analysts said, due to increasing appetite from central banks to diversify their reserves and buy more gold, further dollar weakness and the metal's allure as a hedge against inflation.

"The central bank story is definitely bullish for gold. Also, the physical market still remains strong. We see buying from current price levels, particularly from Asia," De Wet at Standard Bank said.

"It's difficult to say whether it would head for fresh highs this week, but it's likely," he said.

Indian gold traders continued to make purchases as prices eased further and a stronger rupee, which makes the dollar-quoted asset cheaper, helped sentiment, dealers said.

"There is no change in the fundamentals because U.S. interest (rates) will still be low at least until next year's first half," said Wong Eng Soon, an investment analyst at Phillip Futures in Singapore.

Market volatility deterred investment, with holdings at the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, steady at 1,127.860 tons as of November 27.



Silver was at $18.13 an ounce versus $18.25 an ounce on Friday 27 November, when it hit a near two-week low of $17.66.

Platinum was $1,438.00 an ounce, above a one-week low of $1,418.50, but was down from Friday (27 November)'s $1,436.50 an ounce. Palladium was at $356.50 versus $362 an ounce on Friday 27 November, when it touched a one-week low of $351.

(Additional reporting by ChiKako Mogi, Editing by Veronica Brown and Sue Thomas)