July 23, 2014 / 3:26 AM / 6 years ago

PRECIOUS-Safe-haven bids keep gold above $1,300; physical demand eyed

* Gold steady after overnight losses but holds above $1,300
    * Tensions over Ukraine, Gaza strip continue to support
    * Sluggish physical demand a cause of worry- analyst

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, July 23 (Reuters) - Gold held steady on Wednesday
in Asia after dipping overnight, and looked likely to hold above
$1,300 an ounce in the near term as geopolitical tensions from
crises in Ukraine and the Gaza strip brought safe-haven bids.
    But sluggish physical demand in Asia in the seasonally quiet
summer period could weaken support for any price rally and even
fail to provide a floor if prices were to decline.
    Spot gold was little changed at $1,306.61 an ounce by
0627 GMT, after losing 0.4 percent in the previous session,
pressured by firmer equities. U.S. gold edged up
slightly to $1,308.40.
    "We continue to expect gold to come under pressure this
year, while keeping in mind the near-term potential for further
safe-haven demand," Victor Thianpiriya, an analyst at ANZ, said
in a note.
    "Physical demand for gold continues to remain lacklustre...
A significant fall in prices is required to spark renewed
interest."
    A Reuters poll on Tuesday showed that analysts and traders
expected gold prices to average $1,277 for the full year, as
U.S. monetary policy returns to normal and Asian demand is weak.
 
    Demand in Asia, home to major buyers China and India, has
fallen off sharply after strong purchases last year, when gold
prices slumped 28 percent. 
    Other than seasonality and above-normal purchases in 2013,
the possibility of a further drop in prices is also keeping
buyers away, dealers said.
    Bullion, though, is currently getting good support from
geopolitical tensions around the world. The metal is seen as an
alternative investment to riskier assets such as equities.
    Gold trimmed last week's losses after the downing of a
Malaysian airliner over Ukraine, killing all 298 on board. U.S.
officials say pro-Russian separatists most likely shot down the
jet by mistake, not realizing it was a civilian passenger
flight. 
    Tensions eased on Tuesday after a train carrying the remains
of some of the victims arrived in Ukrainian government territory
and separatist leaders gave Malaysian authorities the aircraft's
flight recorders. 
    In the Middle East, the situation remained tense with Israel
pounding targets across the Gaza Strip, saying no ceasefire was
near as top U.S. and United Nations diplomats pursued talks on
halting the fighting that has claimed more than 600 lives.
 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings rose 1.5 tonnes to
804.84 tonnes on Tuesday on safe-haven demand. 
    
    PRICES AT 0627 GMT
 Metal            Last      Change  Pct chg
                                           
 Spot gold         1306.61   -0.39    -0.03
 Spot silver         20.91    0.03     0.14
 Spot platinum      1485.1     5.3     0.36
 Spot palladium     871.88    1.68     0.19
 Comex gold         1307.3       1     0.08
 Comex silver        20.99  -0.018    -0.09
 Euro               1.3464                 
 DXY                80.777                 
                                           
 COMEX gold and silver contracts show the
 most active months
 
 (Editing by Richard Pullin and Muralikumar Anantharaman)
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