PRECIOUS-Gold slips from 6-1/2-month top, waiting for China action

Thu Sep 20, 2012 2:40am EDT

* China factory activity shrinks for 11th month
    * Gold has risen 16 pct from 2012 low on stimulus boost
    * Recent rally looks exhausted, may top out at $1,800
    * Coming Up: Euro zone flash PMI; 0758 GMT

 (Updates prices)
    By Manolo Serapio Jr
    SINGAPORE, Sept 20 (Reuters) - Gold slipped on Thursday as
the dollar strengthened, giving investors room to book recent
gains after prices rose by 16 percent from this year's lows on
measures by global central banks to support flagging economies.
    The bond purchases, actual and planned, by central banks
from the United States to Japan had fuelled a rush for bullion
as investors braced for higher inflation, sending gold prices to
their highest since February on Wednesday.
    Investors are hoping China will be the next to take action
after data on Thursday showed activity in its vast manufacturing
sector contracted for an 11th consecutive month in September. 
    The HSBC Flash China manufacturing purchasing managers'
index stood at 47.8 in September from a nine-month low of 47.6
in August, staying below the 50 mark that divides expansion from
contraction. A measure of output dipped to its lowest level in
10 months. 
    "It's not a very great improvement. It's still contracting
so I still expect some more stimulus from China which could help
gold," said Lynette Tan, analyst at Phillip Futures.
    Spot gold dropped 0.4 percent to $1,762.30 an ounce
by 0609 GMT, after hitting a session high of $1,771.89. Gold
peaked at $1,779.10 on Wednesday, its highest since Feb. 29. 
    The dollar rose versus the euro and a basket of
currencies, weighing on gold and other dollar-denominated
commodities such as oil and base metals.    
   
    China unveiled a series of measures last week to help
stabilise export growth, including faster payment of export tax
rebates and more loans to exporters. 
    That was on top of a series of approvals for infrastructure
projects worth more than $150 billion, two interest rate cuts,
reduction in bank reserve requirements that freed about 1.2
trillion yuan ($190 billion) for lending and a steady series of
liquidity injections into money markets.
   
    STILL EYEING $1,800    
    Another round of economic stimulus measures from other
central banks, including China's, could still help gold break
through this year's high of around $1,790, although prices may
only go up to $1,800, said Tan.
    The last time gold prices hit $1,800 was in November 2011.
    "After the next round of stimulus we probably wouldn't see
much of an action towards the end of the year so prices are
likely to hold steady. There's no catalyst for gold to move
higher after that," she said.
    U.S. gold futures for December delivery were down
0.4 percent at $1,764.70 an ounce.
    "With investment demand gradually increasing and technical
momentum positive, we think it is only a matter of time before
gold prices make a first breakthrough attempt at $1,800," Credit
Suisse said in a note.
    Physical gold demand could pick up over the next two months
during the wedding season in top consumer India, said Tan from
Phillip Futures.
    Elsewhere, spot silver eased 0.8 percent to $34.31 an
ounce, after hitting a 6-1/2-month high of $35.02 on Tuesday.   
    Spot platinum fell 1.1 percent to $1,613.99 an ounce,
after striking miners at major South African platinum producer
Lonmin  said earlier this week they would return
to work after six weeks of labour unrest during which 45 were
killed.
    But violence continued in South Africa where police fired
tear gas and rubber bullets on Wednesday to disperse protesters
near a mine run by the world's biggest platinum producer Anglo
American Platinum, as unrest spread after strikers at
rival Lonmin won big pay rises. 
    
  Precious metals prices 0609 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    
  Spot Gold        1762.30   -6.89   -0.39     12.69
  Spot Silver        34.31   -0.26   -0.75     23.91
  Spot Platinum    1613.99  -18.51   -1.13     15.86
  Spot Palladium    659.97   -6.83   -1.02      1.14
  COMEX GOLD DEC2  1764.70   -7.00   -0.40     12.63        
  COMEX SILVER DEC2  34.37   -0.22   -0.63     23.12         
  Euro/Dollar       1.2973
  Dollar/Yen         78.11
 
  COMEX gold and silver contracts show the most active months
 
 (Editing by Himani Sarkar and Miral Fahmy)