PRECIOUS-Gold edges up on euro, Asia physical buying

Tue Jan 8, 2013 8:40am GMT

* Strong physical demand from China, elsewhere in Asia
supports
    * Spot gold may edge up to $1,665/oz - technicals
    * Coming up: euro zone business climate for Dec at 1000 GMT

 (Adds details, updates prices)
    By Rujun Shen
    SINGAPORE, Jan 8 (Reuters) - Gold inched up on Tuesday as
the euro held on to gains on expectations the European Central
Bank will refrain from a rate cut this week, and as robust
physical demand in Asia underpinned prices.
    Economists expect the ECB to keep rates unchanged at a
meeting on Thursday, supporting the single currency, while the
dollar index edged down, making greenback-priced
commodities more affordable for buyers holding other currencies.
 
    Asia's physical market has picked up so far this year, with
buyers tempted by last week's big drop in prices -- when prices
retreated to as low as 1,626 per ounce -- and on demand ahead of
the Lunar New Year, traders said.
    The trading volume on the Shanghai Gold Exchange's 99.99
gold physical contract shot through the roof on
Monday, hitting a record of 19,504.8 kilograms, after
double-counting transactions in both directions.
    Spot gold had inched up $1.56 to $1,648.20 an ounce
by 0742 GMT. 
    "Physical demand is very strong," said a Beijing-based
trader. "It's a combination of the attraction of lower prices as
well as pre-holiday demand."
    But such appetite could waver if prices recover towards
$1,700, he added. 
    U.S. gold gained 0.1 percent to $1,648.60.
    Shanghai's 99.99 gold traded at 331.58 yuan a gram, or
$1,658 an ounce - a $10 premium over spot prices, compared to
single-digit premium most of last year. 
    Technical analysis suggested that spot gold could edge
higher to $1,665 an ounce, and a previous target of $1,625.79
has been temporarily aborted, said Reuters market analyst Wang
Tao. 
    
    
    
    But prices faced headwinds from worries over the duration of
the U.S. Federal Reserve's bond-purchasing programme, with
central bank officials becoming increasingly concerned about the
side effects of such stimulus measures. 
    Gold is likely to stay on the back foot ahead of clearer
signals on the global economy, analysts said.
    "In the short-term gold lacks momentum to push higher," said
Chen Min, an analyst at Jinrui Futures in the southern Chinese
city of Shenzhen.
    "If we hear anything from the ECB suggesting a worsening
outlook for the region's economy or future rate cuts, it will
weigh on the euro and consequently weigh on gold prices."
    Holdings of the SPDR Gold Trust, the world's biggest
gold-backed exchange-traded fund, fell about two tonnes to
1,340.74 tonnes on Jan. 7, down about 10 tonnes, or 0.7 percent,
from the end of 2012.  
    In industry news, the world's top gold producer, Barrick
Gold Corp, said it is no longer in talks with
state-owned China National Gold Corp to sell it a stake in its
majority-owned, London-listed gold producer African Barrick Gold
.
    Spot palladium inched down 0.4 percent to $665.33,
off a more than one-month low of $661.97 hit in the previous
session.
    
    Precious metals prices 0742 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1648.20    1.56   +0.09     -1.57
  Spot Silver        30.09   -0.03   -0.10     -0.63
  Spot Platinum    1552.50    0.51   +0.03      1.14
  Spot Palladium    665.33   -2.67   -0.40     -3.85
  COMEX GOLD FEB3  1648.60    2.30   +0.14     -1.62        19529
  COMEX SILVER MAR3  30.12    0.03   +0.11     -0.38         5601
  Euro/Dollar       1.3117
  Dollar/Yen         87.45
  COMEX gold and silver contracts show the most active months
 
 (Editing by Muralikumar Anantharaman)