PRECIOUS-Gold up slightly on US housing starts, dollar drop

* Emerging-market demand up, ETF liquidation unseen-analyst
* U.S. housing starts rise fastest in four years
* Moody's maintains Spain's investment grade rating
* Coming up: US weekly jobless claims, Philly Fed index
Thurs

(Adds market details, updates prices)
By Frank Tang
NEW YORK, Oct 17 (Reuters) - Gold inched up on Wednesday,
partially recovering from sharp losses early in the week, in
reaction to the dollar dropping for a second day and to a rise
in U.S. housing starts.
The metal, a traditional inflation hedge, was also supported
by economic optimism after Moody's affirmed Spain's
investment-grade credit rating, allaying fears that the euro
zone's fourth largest economy would be cut to a junk rating.

Gold fell to a one-month low on Monday after a string of
recent strong U.S. data that called into question the extent of
the Federal Reserve's latest bond-buying program to boost the
economy.
"The recent correction in gold prices appears to be ending.
We detected no fresh liquidation in the major gold-ETFs and
increased emerging markets demand in the last couple of days,"
said HSBC metals analyst James Steel.
Spot gold edged up 0.1 percent at $1,748.20 an ounce
by 2:54 p.m. EDT (1854 GMT), its second consecutive day gain. It
had dropped almost 2 percent in the two previous sessions.
U.S. COMEX gold futures for December delivery settled
up $6.70 an ounce at $1,753, with trading volume about 35
percent below its 30-day average, preliminary Reuters data
showed.
Open interest in gold futures fell over 3 percent to 462,826
lots by Tuesday, CME data showed.
The drop was due to a combination of short-covering, long
liquidation and funds switching to better-performing equities,
said George Gero, vice president of RBC Capital Markets.
Gold rose along with a higher S&P 500 equities index,
after U.S. Commerce Department data showed groundbreaking on new
U.S. homes increased by 15 percent in September, its quickest
pace in more than four years.
Holdings in bullion-backed exchange-traded funds climbed on
Tuesday, helped by an inflow to U.S. Comex Gold Trust.
Gold ETF posted sharp outflows earlier this week.

NARROW RANGE EXPECTED
Analysts expect gold prices to remain in a tight range as
investors waited for fresh direction on Europe, where a summit
of European Union leaders begins on Thursday.
The trading range is expected to be narrow this week with
the COMEX November option expiring next week and significant
open interest near its current level at $1,750 an ounce, TD Bank
strategists said in a note.
Investors will also be watching China's third-quarter gross
domestic product figure due later this week. Weak data may point
to stimulative policies that could be supportive for gold.
HSBC's Steel on Wednesday cut its 2012 average gold price
outlook on weak prices earlier this year, but he raised its 2013
and 2014 forecasts on investor demand and high commodity prices.
Among other metals, silver climbed 0.6 percent to
$33.13 an ounce.
Platinum group metals largely ignored gains in industrial
metals, which were led by copper. Spot platinum gained
1.2 percent to $1,658.20 an ounce, while spot palladium
was up 2 percent to $647.60.
2:54 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold DEC 1753.00 6.70 0.4 1744.00 1755.00 101,129
US Silver DEC 33.232 0.273 0.8 32.880 33.300 24,188
US Plat JAN 1670.50 25.30 1.5 1646.60 1672.90 6,967
US Pall DEC 653.40 14.45 2.3 639.75 654.95 2,524

Gold 1748.20 1.01 0.1 1743.81 1753.20
Silver 33.130 0.200 0.6 32.890 33.250
Platinum 1658.20 19.70 1.2 1646.80 1664.99
Palladium 647.60 12.40 2.0 641.27 651.50

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 111,444 169,497 174,197 15.32 -0.34
US Silver 25,595 50,977 56,710 35 7.00
US Platinum 7,042 15,871 9,767 23.71 2.48
US Palladium 2,556 4,228 4,819

(Additional reporting by Clare Hutchison in London; Editing by
Bob Burgdorfer and Grant McCool)