PRECIOUS-Gold off lows as Chinese buyers emerge, silver pressured

Tue May 21, 2013 3:53am EDT

* Gold briefly reclaims $1,400 on Chinese buying interest
    * Investors eyeing Bernanke on stimulus signals
    * Silver still near 2-1/2-year trough


    By A. Ananthalakshmi
    SINGAPORE, May 21 (Reuters) - Gold climbed off session lows
on Tuesday as Chinese buyers picked up the metal, easing some
pressure on bullion which has been hit by persistent outflows
from exchange-traded funds and has lost nearly a fifth of its
value this year.
    But the selling pressure on silver appeared mostly intact
with prices still near 2-1/2-year lows reached during the
intraday sell-off on Monday.
    Gold has been hurt by a shift in investments into
higher-yielding equities as fears grew that the U.S. Federal
Reserve could soon end its bullion-friendly bond-buying program.
The metal fell for seven straight days in its longest losing
streak in four years before closing up nearly 3 percent on
Monday. 
    "We are seeing some strong buying out of China," said Victor
Thianpiriya, commodities analyst at Australia and New Zealand
Banking Group. "Physical demand picked up a little bit yesterday
and today."
    Spot gold was up 0.1 percent at $1,394.90 an ounce by
0627 GMT. It hit a session high of $1,400.90 after falling as
low as $1,383.39.
    Gold prices in Shanghai were about $20 more than
spot gold, indicating that demand in China - the world's No. 2
consumer after India - was strong because it would be cheaper
for Chinese buyers to purchase gold from overseas. 
    
    WAITING ON THE FED
    But the modest price gain suggests investors remain hesitant
in buying gold which is within striking distance of a two-year
low of $1,321.35 hit during April's market rout.
    Expectation that the Fed may soon stop its monthly
$85-billion bond purchases given recent improvements in the U.S.
job market is limiting gold's draw as an inflation hedge.
    "Should Bernanke encourage perceptions that the Fed could
move somewhat earlier than expected, gold could get hurt as a
change in stance may finally usher in higher interest rates,"
said Edward Meir, a metals analyst at futures brokerage INTL
FCStone, referring to Fed Chairman Ben Bernanke. 
    "Then again, Bernanke may choose to stay on hold and not
deviate from previous positions, in which case we could see an
element of support set in over the precious group as the
'stimulus spigot' would remain open for now."
    Bernanke testifies before a congressional committee on
Wednesday, the same day the U.S. central bank releases the
minutes of its last policy meeting.
    Silver, which had largely held its ground during the
sell-off in precious metals last month, appeared to be the next
target for sellers.  
    Spot silver was down 1 percent at $22.69 an ounce. It
hit a session low of $22.41, not far off Monday's trough of
$20.84 which was its lowest since September 2010. It eventually
closed 3 percent higher on Monday. 
    U.S. silver futures were up 0.37 percent at $22.67
after sliding more than 9 percent during the early sell-off in
Asia on Monday.
    Holdings of the largest silver exchange-traded fund (ETF),
the iShares Silver Trust, had fallen to their lowest since
mid-January. Outflows also continued in SPDR Gold Trust,
the world's largest gold-backed ETF, with holdings down to
1,031.50 tonnes on Monday, the lowest in more than four years.
 
    U.S. gold futures gained 0.7 percent to $1,393.5.
  PRECIOUS METALS PRICES 0627 GMT                                                                                                                                      
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1394.90    1.86   +0.13    -16.70                                                                                                                   
  Spot Silver        22.69   -0.23   -1.00    -25.07                                                                                                                   
  Spot Platinum    1473.49  -14.01   -0.94     -4.01                                                                                                                   
  Spot Palladium    741.72   -5.28   -0.71      7.18                                                                                                                   
  COMEX GOLD JUN3  1393.50    9.40   +0.68    -16.85        28355
  COMEX SILVER JUL3  22.67    0.08   +0.37    -25.02         9326
  Euro/Dollar       1.2892                                                                                                   
  Dollar/Yen        102.58                                                                                                                                             
 COMEX gold and silver contracts show the most active months