PRECIOUS-Gold edges up on uncertainty over Europe, FOMC

Mon Jun 18, 2012 3:08pm EDT

* Lingering euro fears after Greek elections boost gold
    * Gold volume, volatility down as trading interest lags
    * Eyes on U.S. Fed meeting, "Op Twist" extension seen
    * Coming up: U.S. housing starts on Tuesday

 (Rewrites, adds comment, updates market activity, adds NEW YORK
to dateline, second byline)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, June 18 (Reuters) - Gold eked out a small
gain o n M onday as lingering uncertainty over the euro zone debt
crisis following Greece's elections and a policy meeting by the
U.S. Federal Reserve lifted bullion from its early losses.
    Safe-haven bids boosted gold as G20 leaders pressed Europe
to do whatever it takes to combat Europe's crisis after a
victory for pro-bailout parties in a Greek vote reduced the
chances of a euro breakup but failed to calm financial markets. 
    Monday's trading volume of U.S. gold stood at just over half
of its 30-day average, and gold option volatility also tumbled
as investors opted to stay on the sidelines ahead of a key Fed
meeting later this week. 
    "With everything going on in Europe and a slowing economy
here, volume is very light today because everybody is very
skittish going forward about what the direction of gold is going
to be," said Anthony Neglia, president of Tower Trading and a
COMEX gold options floor trader in New York.
    Spot gold was up 30 cents at $1,628.09 an ounce by
2:11 p.m. EDT (1811 GMT), recovering from an early low of
$1,606.49. Prior to Monday, bullion had ended higher in each of
the last six sessions.
    U.S. gold futures for August delivery settled down
$1.10 at $1,627. Trading volume was about 40 percent below its
30-day average, preliminary Reuters data showed, consistent with
last week's weak trend.   
    Analysts said that global equities markets' relief at the
Greek vote was offset by worries over its unresolved problems,
the lack of a clear plan for the euro zone as a whole, and
uncertainty over a meeting of Group of 20 world leaders this
week.
    "The fact that risk appetite has not rebounded more
decisively after the Greek elections may suggest that the
markets will push for a broader solution for the euro zone, one
that would remove the contagion risk from Spain and Italy in
particular," said BNP Paribas analyst Anne-Laure Tremblay in
London.
    Tremblay said that gold appears to more sensitive to central
bank action than to variations in risk appetite. 
    Given a U.S. outlook that is weak but not recessionary, the
Fed meeting on Wednesday could opt for extending "Operation
Twist," its effort to drive down long-term borrowing costs by
selling short-term securities to buy longer-term ones,
economists said. 
    The metal had rallied as much as 15 percent after the Fed in
January said it would keep interest rates near zero until at
least late 2014. Gold has since tumbled several times, however,
after Fed Chairman Ben Bernanke mentioned no further easing in
his congressional testimonies.
    Year to date, gold is up about 4 percent.
    
 
    
    PHYSICAL DEMAND WEAK
    Physical gold bullion demand, which has weighed down on
prices of the metal, was weak in top gold consumer India, and it
is likely to remain sluggish in coming months due to the lack of
weddings and festivals during the wet season, dealers said. 
    Among other precious metals, silver edged up 0.3
percent at $28.75 an ounce. Spot platinum eased 0.1
percent at $1,474.49 an ounce, while spot palladium was
up 1.1 percent at $630.25 an ounce.
    
 2:11 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1627.00  -1.10  -0.1  1606.90 1631.30  110,716
 US Silver JUL  28.671 -0.069  -0.2   28.235  29.010   32,751
 US Plat JUL   1484.10  -3.10  -0.2  1479.30 1504.80    6,004
 US Pall SEP    633.15   2.75   0.4   625.00  636.50    1,599
                                                               
 Gold          1628.09   0.30   0.0  1608.70 1629.70         
 Silver         28.750  0.080   0.3   28.300  28.990
 Platinum      1474.49  -1.31  -0.1  1483.20 1500.00
 Palladium      630.25   7.05   1.1   628.30  634.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        117,344   215,914   196,894     22.12   -1.76
 US Silver       38,700    50,449    53,654     33.94   -0.41
 US Platinum      7,462     9,123     8,105     23.42    5.30
 US Palladium     1,656     5,836     4,515                  
                                                               
    

 (Editing by Anthony Barker and Marguerita Choy)
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