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PRECIOUS-Gold climbs to near 3-week high as equities dip; China demand robust
January 6, 2014 / 4:21 AM / 4 years ago

PRECIOUS-Gold climbs to near 3-week high as equities dip; China demand robust

* Gold rallies for 5th day to highest since Dec. 17
    * Drop in Asian shares supports prices
    * Chinese premiums climb as demand remains strong

 (Adds China trading volumes, updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Jan 6 (Reuters) - Gold rallied for a fifth day to
its highest level in nearly three weeks on Monday, as softer
equity markets prompted investors to tap the asset's safe-haven
qualities.
    The metal's rally comes despite a stronger dollar and
bullish comments from the Federal Reserve on the U.S. economy,
but follows a near 30 percent loss last year.
    The upswing in prices failed to dent physical purchases in
China, the world's biggest bullion consumer, where demand has
picked up ahead of the Lunar New Year and trading volumes on the
Shanghai Gold Exchange hit an eight-month high on Monday. 
    "Weaker equities will have more of an impact on gold prices
than a stronger dollar," said Helen Lau, an analyst at UOB-Kay
Hian Securities in Hong Kong.
    "It is all about allocation by funds. If there is an
increase in allocation towards gold and less towards stocks,
there will be a decrease in outflows from gold exchange-traded
funds (ETFs) and that is a positive for prices," she said.
    Lau expects gold to average $1,200 for the year, and says it
is likely hit $1,300 in the first quarter.
    Spot gold rose 0.4 percent to $1,240.90 an ounce by
0739 GMT. It earlier hit a near three-week peak of $1,245.86. 
    The metal lost nearly 30 percent of its value last year as
global stocks jumped and as the Fed announced plans to begin
tapering its bond-buying stimulus programme. Record outflows
from gold ETFs also hurt prices. 
    On Monday, Asian shares fell to a two-week low after growth
in China's services sector slowed sharply last month. The dollar
hovered near a four-week high, supported by an upbeat outlook
for the U.S. economy. 
    Physical demand for bullion in China remained strong with
premiums on the Shanghai Gold Exchange - a physical trading
platform - climbing to about $20 an ounce from Friday's $17. 
    For the 99.99 percent purity gold, volumes
traded on the exchange were 24.86 tonnes on Monday - the highest
daily volume since May 3. 
    
    DATA CUES
    Economic data releases this week could help determine
whether the recent rally in gold prices can hold. 
    U.S. nonfarm payrolls and trade numbers expected later this
week will provide clues on the strength of the economic
recovery, while the minutes of the December Fed policy meeting -
at which the central bank decided to cut back bond purchases -
may hint at how aggressive the Fed will be with tapering.
    Ben Bernanke, who steps down as head of the Fed at the end
of January, on Friday gave an upbeat assessment of the U.S.
economy in coming quarters, though he did temper the good news
in housing, finance and fiscal policies by repeating that the
overall recovery "clearly remains incomplete". 
    In what could be his last speech as Fed chairman, Bernanke
also said the U.S. central bank is no less committed to highly
accommodative policy now that it has trimmed its bond-buying
stimulus. 
    
    PRICES AT 0739 GMT       
 Metal               Last       Change     Pct chg
                                                    
 Spot gold              1240.9       4.74       0.38
 Spot silver             20.08      -0.04       -0.2
 Spot platinum         1400.25      -8.49       -0.6
 Spot palladium          725.5       0.75        0.1
 Comex gold Dec3        1240.5        1.9       0.15
 Comex silver Dec3      20.095      -0.12      -0.57
 Euro                   1.3577                      
 DXY                    80.881                      
                                                    
 COMEX gold and silver contracts show the most
 active months
 
 (Reporting by A. Ananthalakshmi; Editing by Richard Pullin and
Tom Hogue)

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