PRECIOUS-Gold bounces on weak dollar; but near 4-mth low

Wed Dec 19, 2012 2:23am EST

* Progress in the U.S. fiscal talks dent gold's safe-haven
appeal
    * Gold to range from $1,660-$1,678 -technicals
 
    * Coming Up: Housing starts number mm; 1330 GMT

 (Updates prices, comments)
    By Lewa Pardomuan
    SINGAPORE, Dec 19 (Reuters) - Gold regained strength on
Wednesday as a weaker U.S. dollar spurred buying from jewellers,
but prices were still within sight of an almost four-month low
given signs of progress in U.S. fiscal talks that dented
bullion's safe-haven appeal.
    Some investors have shifted into equities as optimism a deal
could be reached soon to avert the "fiscal cliff" of tax hikes
and spending cuts that threaten to plunge the United States into
recession fuelled an appetite for riskier assets. 
    Gold added $6.16 an ounce to $1,675.70 by 0658 GMT   
after falling to it lowest since August at $1,661.01 in the
previous session on technical selling. 
    "We are likely to see some technical buying. Our support
level is now at about $1,640. I don't think any further buying
will be sustainable," said Lynette Tan, senior investment
analyst at Phillip Futures in Singapore.
    A U.S. deal on the "fiscal cliff" could eventually lift the
U.S. dollar and prompt investors to turn to other risk assets
such as stocks, hurting demand for gold, she said.
    "We will see a lack of safe-haven demand."
    U.S. House of Representatives Majority Leader Eric Cantor
said he expects a vote on a Republican offer to avert the
"fiscal cliff" on Thursday, and he expects to have enough votes
to pass the measure. 
    U.S. gold futures for February rose $6.50 an ounce
to $1,677.20.       
    
    "The gold price has re-visited lows from early November
($1,675 an ounce), representing a possible bottom in a range if
this level holds," said Deutsche Bank in a report.
    "If not, and if more selling pressure is forthcoming, we
expect that the gold price could potentially revisit mid-summer
lows of $1,600 an ounce." 
    Gold, traditionally an inflation hedge, is on track to drop
around 5 percent this quarter, worst since the third quarter of
2008 at the height of the global economic crisis, marked by the
bankruptcy filing of Lehman Brothers. 
    But for the year, gold is up around 7 percent and set for a
twelfth straight annual growth driven by rock-bottom interest
rates, concerns over the financial stability of the euro zone
and diversification into bullion by central banks.
    "We're seeing better demand today, but some customers have
also cut their positions after prices fell back below $1,700.
Indonesia is a little bit active. Typically, they are quiet,"
said a physical dealer in Singapore.
    "The price comes up, yet the Indonesians are buying.
Thailand has been buying recently, so I think they are quite
long. Premiums are between $1 and $1.10. It's little changed." 
    In other markets, Asian shares and the euro rose to
multi-month highs, while the dollar index slipped, making
dollar-priced commodities cheaper for holders of other
currencies. 
       
  Precious metals prices 0658 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1675.70    6.16   +0.37      7.16
  Spot Silver        31.69    0.07   +0.22     14.45
  Spot Platinum    1594.49    3.49   +0.22     14.46
  Spot Palladium    691.00    4.50   +0.66      5.90
  COMEX GOLD FEB3  1677.20    6.50   +0.39      7.05        19453
  COMEX SILVER MAR3  31.77    0.10   +0.30     13.79         4481
  Euro/Dollar       1.3243
  Dollar/Yen         84.30
  

 (Editing by Himani Sarkar)
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