PRECIOUS-Gold heads for third weekly drop, firm shares weigh

Fri Apr 12, 2013 3:07am EDT

* Gold on track for worst week since late Feb
    * North Korea tensions fail to spark safe-haven buying
    * U.S. earnings in focus
    * Coming up: U.S. Producer prices at 1230 GMT

 (Updates prices, adds physical market quotes)
    By Lewa Pardomuan
    SINGAPORE, April 12 (Reuters) - Gold prices were steady on
Friday but remained on track for their worst week since late
February as strong equities lured investors seeking better
returns, while outflows from exchange-traded funds underlined
the shaky outlook for bullion.
    Escalating tensions on the Korean peninsula have done little
to stir safe-haven buying, though gold could regain some of its
lustre if the latest U.S. earnings season disappoints.
    Gold was steady at $1,560.84 an ounce by 0628 GMT,
heading for a more than 1-percent decline this week, its third
such drop in a row.
    The metal has slipped around 7 percent so far this year,
after rising for the last 12 years, lagging gains of more than
11 percent in the S&P 500 index.
    "U.S. equities have continued to defy gravity," said CIMB
regional economist Song Seng Wun, adding that the market had
also shrugged off the threat of conflict with North Korea.
    "Normally, given rising tensions, there will be flight to
safety and gold will benefit. But I suppose at this point, while
we are mindful of the increased risk, nobody really believes
that the North Koreans will actually carry through on their
threats."
    A U.S. government agency has said North Korea has a nuclear
weapon it can mount on a missile, adding an ominous dimension to
threats of war by Pyongyang, but the assessment was swiftly
dismissed by several U.S. officials and South Korea.
 
     Setting geopolitical tensions aside, wary investors cut
exposure to gold, with total holdings at the world's major
bullion ETF falling to their lowest since early 2012. 
 
    U.S. gold for June delivery was $1,560.90 an ounce,
down $4.00.   
    The physical market was barely active, with jewellers in
Thailand already away ahead of the Songkran holiday next week.
Premiums for gold bars were unchanged in Singapore at $1.20 an
ounce to spot London prices.
    Although top consumer India will celebrate a series of
religious festivals considered auspicious for gold purchases,
dealers have yet to see a surge in demand from jewellers there. 
    "It's a thin market and a two-way business. I mean, we are
seeing both buying and selling today," said a dealer in
Singapore. "Buying is not exceptionally high from India. I would
say there isn't anything unusual yet."
    Japan's aggressive monetary stimulus initially supported
gold this week, but investors were later distracted by signs the
U.S. Federal Reserve could soon end its bullion-friendly bond
buying programme.
    Meanwhile, heavily indebted euro zone nations such as Italy
and Portugal could come under pressure to put their bullion
reserves to work as a result of plans for Cyprus to sell gold to
meet its financing needs. 
    Fallout from the messy bailout of Cyprus will top the agenda
of a two-day EU finance ministers meeting in Dublin beginning on
Friday. 
        
  Precious metals prices 0628 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1560.84    0.10   +0.01     -6.79
  Spot Silver        27.59   -0.01   -0.04     -8.88
  Spot Platinum    1523.50   -8.50   -0.55     -0.75
  Spot Palladium    728.00    0.00   +0.00      5.20
  COMEX GOLD JUN3  1560.90   -4.00   -0.26     -6.86        13016
  COMEX SILVER MAY3  27.53   -0.17   -0.60     -8.93         2428
  Euro/Dollar       1.3101
  Dollar/Yen         99.40
 
  COMEX gold and silver contracts show the most active months
 
 

 (Editing by Himani Sarkar and Joseph Radford)
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