PRECIOUS-Gold bounces off 6-month low; China buys after holiday

Mon Feb 18, 2013 3:11am EST

* Shanghai gold slumps as market reopens after holiday;
buying surges
    * Gold to end rebound below $1,618-technicals
 
    * Coming Up: Euro zone current account; 0900 GMT

 (Adds comments, details; updates prices)
    By Lewa Pardomuan and Rujun Shen
    SINGAPORE, Feb 18 (Reuters) - Gold rebounded from a
six-month low on Monday as bargain hunters resurfaced and buyers
in China returned to the physical market after the Lunar New
Year holiday, but a firm U.S. dollar was likely to limit the
upside. 
    Gold has been under pressure from technical selling and
gains in the U.S. currency after the euro slipped from a
15-month high struck in early February on renewed worries about
the health of the euro zone economy. 
    Gold rose half a percent to $1,616.35 by 0728 GMT
after falling to around $1,598 on Friday, its weakest since
August. Friday's loss marked bullion's biggest one-day drop
since December.
    "There is a fair amount of buying because spot prices fell a
lot during the holiday," said Peter Tse, director at
ScotiaMocatta, adding the buying frenzy would calm down in
coming days.
    Spot contract for gold of 9999 purity on the Shanghai Gold
Exchange dropped to 326.40 yuan a gram, its
lowest in nearly seven months, tracking losses in global market
prices over the week-long holiday. Volume exceeded 22 tonnes,
marking a record high.
    In Hong Kong, premiums for gold bars rose to as high as
$1.70 an ounce to the spot London prices from $1.50 last week,
reflecting a surge in buying interest from jewellers, said
Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
    But he doubted whether the buying interest would last. 
    "The strong dollar is the major point. Sentiment is not
bullish for the time being, even though we see there's tension
in North Korea," said Leung, referring to a lack of safe-haven
buying normally associated with geopolitical tensions. 
    North Korea has told key ally China it is prepared to stage
one or even two more nuclear tests this year in an effort to
force the United States into diplomatic talks with Pyongyang,
said a source with direct knowledge of the message.
 
    The dollar index was headed for a second day of
gains, holding near a one-month high hit late last week. A
stronger greenback makes dollar-priced commodities costlier for
buyers holding other currencies.
    
    
    
    Leung saw support for the metal at $1,600, which if breached
could take it down to $1,580. 
    Hedge funds and some big speculators slashed their bullish
bets on U.S. commodities, taking aim particularly at gold which
has lost some of its lustre this year, data released on Friday
showed. 
    U.S. gold for April delivery inched up 0.4 percent
to $1,616.40.
    A raft of business surveys this week will be studied for
confirmation of hopes that a dire fourth quarter of 2012 marked
the cyclical trough for the world economy. 
    Major powers plan to offer to ease sanctions barring trade
in gold and other precious metals with Iran in return for
Iranian steps to shut down the nation's newly expanded Fordow
uranium enrichment plant, Western officials said on Friday.
 
    
      Precious metals prices 0728 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1616.35    7.29   +0.45     -3.47
  Spot Silver        30.05    0.30   +1.01     -0.76
  Spot Platinum    1686.49    8.99   +0.54      9.87
  Spot Palladium    754.72    1.25   +0.17      9.06
  COMEX GOLD APR3  1616.40    6.90   +0.43     -3.54        30843
  COMEX SILVER MAR3  30.04    0.19   +0.64     -0.63         9475
  Euro/Dollar       1.3335
  Dollar/Yen         94.05
  COMEX gold and silver contracts show the most active months
 
 (Editing by Muralikumar Anantharaman)