PRECIOUS-Gold posts 5 pct weekly loss, outlook seen volatile

Fri Apr 19, 2013 3:35pm EDT

* Fitch cuts Britain's top-notch credit rating
    * Demand for coins, bars soars in Asian markets
    * Gold drops over 11 percent in two weeks
    * Coming up: Chicago Fed index Monday

 (Updates throughout, adds market details)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, April 19 (Reuters) - Gold rose on physical
buying on Friday, failing to hold onto earlier sharp gains, as
bullion posted heavy losses for a second consecutive week on
investor liquidation driven by months of disappointment over its
performance.
    The precious metal is down more than 5 percent this week
after notching its biggest-ever daily loss in dollar terms on
Monday. Bullion's collapse caught many veteran investors, who
see gold as portfolio protection against inflation and other
market risks, by surprise.
    "With the significant move to the downside, gold is
rebounding off its low on a pick-up in physical demand and
short-covering," said David Meger, director of metals trading at
Vision Financial Markets.
    The market was supported later this week as consumers
snapped up bars, coins, nuggets and jewellery as a slump in the
price of the yellow metal released years of pent-up retail
demand. 
    Still, analysts said more weakness could be on the cards,
including further outflows from exchange-traded funds and
possible calls by Federal Reserve policymakers to reduce the
need for further monetary stimulus. 
    Traders also closely monitor options-related strategies in
the futures market ahead of U.S. gold option expiration next
week.
    Gold rose 0.6 percent to $1,398.96 an ounce by 2:52
p.m. EDT (1822 GMT), after trading as high as $1,424.51 in
Friday's session.
    U.S. gold futures for June delivery settled up $3.10
at $1,395.60, with preliminary Reuters data showed trading
volume set to finish lower than its 30-day average.
    Gold was underpinned after Fitch Ratings became the second
major international agency to strip Britain of its top-notch
credit rating. 
    Still, it posted a two-week loss of over 11 percent, its
largest decline over a two-week period since October 2008.   
The market fell by a combined $225 on Friday and Monday, which
compares with a total trading range of $260 in 2012. It is down
about 18 percent so far this year.
    The big question is whether gold has entered a lasting bear
market after 12 years of consecutive yearly gains. Gold hit the
lowest price since February 2011 and is now around $500 below
its record high of $1,920.30 set in September 2011.

    RETAIL RUSH
    Dealers around the world said they saw heavy volumes of
physical buying, even though prices had recovered nearly $100
since hitting a two-year trough this week. Buying improved in
top consumer India after a lacklustre start. 
 

   

    However, holdings of the SPDR Gold Trust, the world's
largest gold-backed ETF, are at their lowest in three years
after falling by a further 0.2 percent to 1,133 tonnes on
Thursday. 
    A plan by Cyprus to sell excess gold reserves to raise
around 400 million euros ($523 million) sparked off gold's rout,
as the news led to speculation that other indebted euro zone
countries could follow suit.
    Other precious metals were mixed as gold trimmed its gains,
with silver down 0.3 percent to $23.16 an ounce and
palladium 1 percent higher at $673. Platinum 
reversed earlier gains to trade down 0.1 percent at $1,421.49.
 2:52 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold JUN   1395.60   3.10   0.2  1385.40 1424.70  179,208
 US Silver MAY   22.96 -0.285  -1.2   22.865  23.820   44,413
 US Plat JUL   1423.90  -5.10  -0.4  1418.20 1449.90    7,510
 US Pall JUN    677.05   7.25   1.1   665.60  681.70    3,189
                                                               
 Gold          1398.96   8.21   0.6  1386.73 1424.51         
 Silver         23.160 -0.080  -0.3   22.920  23.840
 Platinum      1421.49  -1.01  -0.1  1420.50 1448.00
 Palladium      673.00   6.50   1.0   667.50  680.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        187,328   222,671   178,310     21.71   -2.29
 US Silver       53,941    60,047    54,087     34.09   -2.02
 US Platinum      7,536    15,962    12,095     21.34    1.81
 US Palladium     3,202     5,314     5,317                  
                                                               
 
 (Additional reporting by Lewa Pardomuan in Singapore; Editing
by Veronica Brown, Alison Birrane and James Dalgleish)
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