PRECIOUS-Gold up 1 pct at 3-1/2-month high on ECB stimulus talk

Tue Aug 21, 2012 3:40pm EDT

* British newspaper says ECB moving to help Spain, Italy
    * Bullion at highest since May, rally in fifth day
    * Platinum up over $120/oz in past week on S.Africa woes
    * Coming up: U.S. existing home sales Wednesday

 (Adds details, graphic link, updates market activity)
    By Frank Tang
    NEW YORK, Aug 21 (Reuters) - Gold rose to its highest since
May on Tuesday on speculation the European Central Bank will act
to help Spain and Italy, while platinum also hit a 3-1/2 month
high as violence at a South African mine raised concerns about
supplies.
    The yellow metal's 1.2 percent gain was its biggest one-day
rise in almost a month, extending bullion's rally to a fifth
straight session on reports the ECB was moving to ease Spanish
and Italian borrowing costs.
    Technical support helped as gold rose above its 100-day
moving average, but analysts said its 200 DMA could form the
next resistance. Bullion buying also was lifted as Wall Street
hit a four-year high earlier in the session. U.S. equities later
fell. 
    "There is still an overriding fear that the equities markets
have appreciated beyond the point of sustainability so there is
a level of fear and desire for diversification into gold," said
Jeffrey Sica, chief investment officer at SICA Wealth
Management. 
    "The economic numbers around the world have not proven to
justify a recovery without the anticipated liquidity created by
central banks," said Sica, whose firm manages $1 billion in
assets. 
    Spot gold hit a high of $1,641.20 an ounce, the
highest since May 7. It was up 1.2 percent at $1,638.83 an ounce
by 2:22 p.m. (1822 GMT).
    U.S. gold futures for December delivery settled up
$19.90 at $1,642.90.
    Trading volume was 20 percent below its 30-day average, 
preliminary Reuters data showed, rebounding after it logged just
72,000 lots to set a 2012 low on Monday.
    Silver climbed 2.2 percent to $29.41 an ounce.
Earlier in the session, it reached its highest since early June
at $29.51 an ounce.
    Talk of more stimulus ran rampant as Greece's prime minister
 meets German Chancellor Angela Merkel, French President
Francois Hollande and Eurogroup chief Jean-Claude Juncker this
week to try and secure more funding from the European Union,
International Monetary Fund and ECB.
    Traders referred to a story in Britain's The Daily Telegraph
newspaper, which said it could confirm earlier reports in German
media that ECB experts were examining plans to effectively cap
Spanish and Italian bond yields.
    However, an ECB spokeswoman, when asked about the Telegraph
story, referred back to the ECB's statement on Monday when it
said it was misleading to report on policy decisions that had
not been taken.
    
    PLATINUM OVERBOUGHT?
    Platinum touched its highest since early May at
$1,508.25 an ounce and was last at $1,501.90 an ounce, up 1.1
percent. Its recent rise has made it this year's best performing
precious metal, up more than 7 percent.
    On charts, platinum's 8 percent rally in the last four
sessions lifted its relative strength index (RSI) above 70, an
area that often indicates a market is overbought.
    (Platinum overbought signal: r.reuters.com/peq22t )  
    
    Platinum has been the biggest gainer of the last seven days,
up more than $120 an ounce week-on-week on Tuesday, due to
violence that killed more than 40 people at a mine operated by
Lonmin, the world's third-largest platinum producer.
    Spot palladium rose 2.8 percent at $620.40 an ounce.
It also rode gold and platinum's coat-tails to its highest since
late June on Tuesday at $626.
 2:22 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1642.90  19.90   1.2  1620.80 1643.60  114,412
 US Silver SEP  29.428  0.835   2.9   28.610  29.460   37,510
 US Plat OCT   1507.80   9.60   0.6  1479.60 1511.00   10,889
 US Pall SEP    624.20  16.50   2.7   597.40  626.15    4,903
                                                              
 Gold          1638.83  18.74   1.2  1619.40 1641.20         
 Silver         29.410  0.640   2.2   28.690  29.510
 Platinum      1501.90  16.70   1.1  1483.80 1508.25
 Palladium      620.40  16.90   2.8   603.90  626.00
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        123,418   155,146   185,326     17.53    0.82
 US Silver       44,154    39,460    56,400     24.41    1.88
 US Platinum     11,672    13,080     9,529     22.88   -0.13
 US Palladium     5,918     5,667     4,587                  
                                                              
    

 (Additional reporting by Jan Harvey in London.; Editing by Bob
Burgdorfer and Andre Grenon)
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