Gold rises in thin trade, eyes ECB, EU meetings

NEW YORK/LONDON Wed Dec 7, 2011 12:41pm EST

Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner

Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011.

Credit: Reuters/Lisi Niesner

NEW YORK/LONDON (Reuters) - Gold edged higher in thin choppy trade on Wednesday, as investors stayed on the sidelines ahead of a European Central Bank policy meeting and a European summit aimed at resolving the region's debt crisis.

Bullion gyrated near the unchanged level and trading volume was on track to come sharply below its 30-day average, as pessimistic comments from Germany and new data exposing growing stress among European banks pressured equity markets.

Technical support helped lift gold prices after the metal reclaimed support of the 100-day moving average. But analysts said gold could decline if the stock markets turned bullish.

"Should enthusiasm for equity's safety increase in any measurable way, we feel the post knee-jerk reaction would be negative for gold," said Rick Bensignor, chief market strategist of Merlin Securities.

Spot gold rose 0.4 percent to $1,734 an ounce by 11:49 a.m. EST, on track for a second consecutive day of gains.

U.S. gold futures for February delivery were up $6.20 at $1,738 an ounce.

On Tuesday, gold rose after Standard & Poor's put the credit ratings of all euro zone members including core economies Germany and France under review for possible downgrade.

Spot silver fell 0.6 percent to $32.52.

ECB, EU MEETINGS IN FOCUS

Bullion investors, like those in all financial markets, will monitor a Friday meeting of EU leaders, who are under mounting pressure to solve the fettering debt crisis.

"Such a big unknown event risk is making people quite cautious and, heading into year-end as well, no one really wants to take any positions and it adds to that lack of interest in the market," said Standard Chartered analyst Daniel Smith.

Investors will also keep an eye on a policy meeting by the ECB, which is expected to cut its benchmark interest rate for the second month.

Gold hit a record $1,920.30 in September and is trading up almost 22 percent in the year-to-date.

Among platinum group metals, platinum slipped 0.4 percent to $1,513.74 an ounce. The gold-platinum spread widened to $220 an ounce on Tuesday, its widest since Reuters started recording prices in 1985.

Platinum has traded at a discount to gold for the past three months - the longest period since 1985. The metal, mainly used as autocatalysts, has lost some of its appeal to investors amid economic uncertainty.

Flows of metal into ETFs, which were robust earlier in the year, have turned into outflows in the last three weeks, bringing total holdings of platinum in the major ETFs tracked by Reuters to their lowest in a year.

Spot palladium rose 2 percent to $680.50. The palladium price has rallied by nearly 30 percent since hitting one-year lows in September.

(Editing by David Gregorio)

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