PRECIOUS-Gold up after ECB rate cut but physical demand slows

Thu May 2, 2013 2:42pm EDT

* ECB cuts main interest rate by 25 bps to 0.5 percent
    * Asian physical buying slows after recent surge -dealers
    * Gold ETFs holdings lowest since September 2009
    * Coming up: U.S. April nonfarm payrolls data on Friday

 (Adds comment, second byline, dateline)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, May 2 (Reuters) - Gold rose on Thursday as
the European Central Bank cut its interest rate for the first
time in 10 months, affirming the metal's inflation-hedge appeal
a day after the Federal Reserve said it would keep up its bond
purchases to spur growth. 
    The metal was lifted by the ECB's decision to lower its key
rate by a quarter percentage point to a record low 0.5 percent,
and it held out the possibility of further policy action to
support the recession-hit euro zone economy. 
    Bullion had lost $225 per ounce between April 12 and 16 as
some feared the Fed might withdraw its stimulus. Since then,
strong physical demand around the world has cut that drop by
more than half. 
    On Wednesday, the Federal Open Market Committee said that it
would continue buying $85 billion in bonds each month to keep
interest rates low and spur growth. 
    "The gold market is responding to the fact that the FOMC
reiterated its easy monetary policy and left open the
possibility of further expansion," said Brad Yates, metals
trader at NTR Bullion Group. 
    "It's a slow day for U.S. physical demand with prices
recovering, however," Yates said.
    Spot gold rose 0.8 percent to $1,467.81 an ounce by
1:54 p.m. EDT (1754 GMT), having earlier risen as high as
$1,473.40. 
    On Wednesday, the metal had pared losses after the FOMC
statement but still ended more than 1 percent lower.
    U.S. Comex gold futures for June delivery settled up
$21.40 to $1,467.60 an ounce, with trading volume on track to
finish below its 30-day average, preliminary Reuters data
showed.
    Easy monetary policy around the world extended gold's bull
run to a 12 consecutive year last year, as investors bought
bullion as a hedge against inflation and economic uncertainties
brought by unprecedented stimulus by central banks after the
2008 economic crisis. 
    A nearly 1 percent rally in the dollar index, and
after the ECB rate cut and Wall Street's strong gains, however,
kept gold from rising further, traders said.  
    Investors turned their attention toward the U.S. non-farm
payrolls report for April on Friday, which could give signals
for the longer-term prospects for the Fed's monetary stimulus. 
    On Thursday, data showed the number of Americans filing new
jobless benefits claims fell sharply last week to its lowest
level since the early days of the 2007-09 recession, a sign the
job market is still healing even though the economy remains
weak. 
        
    PHYSICAL MARKET SLOWS
    Physical market activity slowed after a recent surge in the
purchase of gold bars, coins and nuggets across Asia sent
premiums for gold bars to multi-year highs. 
    Gold's sell-off last month has widened a disconnect between
funds that sold on dissatisfaction over bullion's
underperformance and individual investors who could not get
enough physical gold coins and bars at bargain prices.
 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 0.3 percent to
1,075.23 tonnes on Wednesday, the lowest since September 2009.
 
    In other precious metals, silver rose 1.2 percent to
$23.81 an ounce. Platinum was up 1.3 percent to $1,490.50
an ounce, while palladium rose 0.9 percent to $692.
   
 1:54 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold JUN   1467.60  21.40   1.5  1448.10 1473.30  135,461
 US Silver JUN   23.81  0.486   2.1   23.385  24.150      989
 US Plat JUL   1500.20  30.70   2.1  1462.00 1501.80    8,225
 US Pall JUN    693.30   8.55   1.2   682.95  695.85    2,206
                                                               
 Gold          1467.81  11.07   0.8  1449.58 1473.40         
 Silver         23.810  0.280   1.2   23.440  24.190
 Platinum      1490.50  19.50   1.3  1465.50 1499.50
 Palladium      692.00   6.50   0.9   685.50  693.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        143,015   231,053   177,504     20.56   -1.43
 US Silver       51,567    76,633    54,895     34.63    4.64
 US Platinum      8,299    15,234    11,944     18.92   -0.05
 US Palladium     2,321     5,161     5,093                  
                                                               
   

 (Additional reporting by Lewa Pardomuan in Singapore; Editing
by Keiron Henderson, David Cowell and Chris Reese)