PRECIOUS-Gold posts biggest weekly gain in nearly 2 years

Fri Jul 12, 2013 8:35pm BST

* Gold ETFs outflow, equities strength seen bearish
    * Shanghai gold, silver futures hit record volume, premium
up
    * Investors digest France ratings downgrade, Cyprus remarks
    * Coming up: U.S. retails sales Monday

 (Adds market details, updates prices)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, July 12 (Reuters) - Gold eased on Friday
but notched its biggest weekly advance in nearly two years as
fears of an imminent winding down of the U.S. Federal Reserve's
monetary stimulus eased for now.
    Spot bullion rose 4.8 percent for the week, the biggest
weekly gain since October 2011. The metal rallied after Fed
Chairman Ben Bernanke on Wednesday said the U.S. central bank
needed to keep an stimulative monetary policy in place given low
inflation and an uncertain job market.
    Signs of some physical supply tightness in gold, as
reflected by high premiums and record volume in the Shanghai
Futures Exchange and a surge in gold lease rates, helped to
limit bullion's losses on Friday.
    Analysts said, however, recent gains in U.S. equities amid
some positives signs for the economy and no indications of
abatement in outflows from gold-backed exchange-traded funds
could pressure the metal.
    "The fact that the leading U.S. equity indices closed at
record highs yesterday - which could prompt investors to switch
once again from gold ETFs to equities - is problematic for
gold," said Eugen Weinberg, head of commodity research at
Commerzbank.
    "Any prolonged recovery of the gold price is almost
inconceivable unless the ETF outflows abate," Weinberg said.
    Spot gold was down 0.2 percent at $1,282.06 an ounce 
by 3:03 p.m. EDT (1903 GMT), snapping a four-day winning streak.
    U.S. Comex gold futures for August delivery settled
down $2.30 to $1,277.60 an ounce, with trading volume about 20
percent below its 30-day average, preliminary Reuters data
showed.
    Gold pared losses after government data showed that U.S.
producer prices rose more than expected in June, increasing
gold's inflation-hedge appeal. 
    Holdings of the world's largest gold-backed ETF SPDR Gold
Trust posted the biggest weekly loss of 2.6 percent since
the end of April. 
    Investors now digested news that sovereign rating of France
was downgraded by Fitch on Friday, and Italy's credit rating was
cut by Standard & Poor's earlier in the week. Gold is a
traditional safe haven against political and economic turmoil.
 
    Gold's reaction was limited after Cypriot President Nicos
Anastasiades said he hoped there would never be a need for the
island to sell its gold reserves, an assessment stipulated in an
international bailout for Cyprus. 
    
    SUPPLY TIGHTNESS
    The cost of borrowing gold stayed near its highest level
since January 2009, reflecting dwindling supplies from bullion
banks after heavy liquidation and resilient demand for physical
gold products.
    Trading volumes for gold and silver on the Shanghai Futures
Exchange (ShFE) have jumped to record highs a week after the
bourse launched after-hours trading, driven by a surge in
investment and hedging demand. 
    Also, premiums on Chinese gold and silver products stayed
sharply higher than in the United States.
    Meanwhile, total U.S. COMEX registered gold stocks fell to a
12-year low of less than 1 million ounces, underlying the
tightness of the physical bullion market, said James Steel,
HSBC's chief metals analyst. GC-TTLRGST-STX
    Registered gold refers to the 100-ounce COMEX gold bullion
bars that meet the standard of and are used to back requests for
U.S. gold futures delivery.
    Among other precious metals, silver fell 1.1 percent
to $19.87 an ounce. Platinum inched down 0.1 percent to
$1,402.99 an ounce, while palladium gained 0.1 percent to
$716.97 an ounce.
 3:03 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1277.60  -2.30  -0.2  1266.40 1287.40  124,511
 US Silver SEP  19.792 -0.164  -0.8   19.620  20.190   25,378
 US Plat OCT   1406.90  -0.70   0.0  1398.10 1418.10    5,804
 US Pall SEP    722.90   4.70   0.7   710.30  724.90    2,189
                                                               
 Gold          1282.06  -2.63  -0.2  1268.45 1288.25         
 Silver         19.870 -0.230  -1.1   19.670  20.210
 Platinum      1402.99  -1.51  -0.1  1399.00 1414.75
 Palladium      716.97   0.47   0.1   715.27  722.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        150,340   194,453   179,963     23.85   -0.12
 US Silver       26,575    66,995    56,287     31.36   -1.72
 US Platinum      5,870    16,448    13,041     24.21   -1.95
 US Palladium     2,209     4,450     5,524                  
                                                               
 
 (Additional reporting by A. Ananthalakshmi in Singapore;
editing by Keiron Henderson, Kenneth Barry and Marguerita Choy)