PRECIOUS-Gold supported by physical buying, EU summit eyed
* Bargain-hunting seen on physical market
* Gold strength to continue into next year
* Gold seeks direction - technicals [ID:nL3E6NG015]
* Coming up: U.S. initial jobless claims; 1330 GMT (Updates prices)
By Rujun Shen
SINGAPORE, Dec 16 (Reuters) - Spot gold edged up on Thursday as physical buying lent support amid a steady dollar after upbeat U.S. data, while investors looked towards a European Union summit that is expected to find solutions for the region's debt crisis for trading cues.
U.S. industrial production rose at its fastest pace in four months in November, implying a self-sustaining recovery is now entrenched, but a mild gain in consumer prices indicated still abundant slack in the economy. [ID:nN15122981]
Spot gold edged up 0.2 percent at $1,383.09 an ounce by 0656 GMT, after declining in the previous session on the dollar rally following Moody's move to put Spain on review for a possible downgrade.
U.S. gold futures edged down 0.2 percent to $1,383.9.
"So long as the U.S. doesn't raise interest rates, gold will remain strong, and people are looking at $1,500 or even $1,600 price levels for next year," said a Hong Kong-based dealer.
"China has been tightening, but it would be reluctant to raise interest rates rapidly, fearing the inflow of hot money."
Gold was expected to trade in the range of $1,370 to $1,420 in the last few weeks of the year, he added.
The technical signals for spot gold are conflicting as chances are even for a rise as well as a fall from the current level, according to Reuters market analyst Wang Tao.
For a 24-hour gold technical outlook:
Bargain hunting was seen on physical market in Asia, but scrap selling has subsided since prices eased from record high levels hit last week, dealers said.
In the first ten months of the year, the gold flow from Hong Kong, a bullion trade hub, to the mainland China more than doubled from a year earlier, showing robust demand from China. [ID:nL3E6NG04R]
For a graphic on the gold flow from Hong Kong to China, as well as China's gold output, click:
Investors are watching the European Union leaders start a two-day summit on Thursday, hoping to find a solution to the region's sovereign debt crisis. [ID:nLDE6BE29I]
The euro, which came under pressure on Wednesday, remained weak and could decline further, as the EU summit was seen unlikely to come up with a cure. The dollar was steady against a basket of currencies.
With the euro zone's debt crisis lingering and the outlook for U.S. economy still lukewarm, gold prices are seen to be well-supported into the first quarter. But the momentum, which has pushed prices up 26 percent so far this year, could ease after that.
"After averaging around the $1,375 per ounce level in the March quarter 2011, we expect the gold price to gradually ease as the global recovery looks better entrenched and investor jitters abate," said a research report by National Australia Bank.
"Even so, the gold price should hold up quite well next year with some ongoing investment demand and a further recovery in jewellery consumption being supportive factors."
Holdings in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, edged down less than one tonne to 1,286.187 tonnes, its lowest since late November.
Precious metals prices at 0656 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 1383.09 2.64 +0.19 26.23 Spot Silver 29.06 0.27 +0.94 72.67 Spot Platinum 1692.74 -2.76 -0.16 15.39 Spot Palladium 747.72 1.00 +0.13 84.39 TOCOM Gold 3756.00 3.00 +0.08 15.25 40757 TOCOM Platinum 4641.00 13.00 +0.28 5.93 8435 TOCOM Silver 79.00 0.00 +0.00 52.80 2056 TOCOM Palladium 2041.00 -1.00 -0.05 75.19 324 Euro/Dollar 1.3230 Dollar/Yen 84.24
TOCOM prices in yen per gram. Spot prices in $ per ounce. (Editing by Himani Sarkar)
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