PRECIOUS-Gold falls as stock markets hold firm; physical demand strong

Tue May 28, 2013 3:31am EDT

* Gold falls after gains seen on Monday, last week
    * Nikkei edges higher in choppy trade 
    * Coming up: U.S. consumer confidence at 1400 GMT

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, May 28 (Reuters) - Gold fell on Tuesday as Asian
stock markets and the dollar firmed after a turbulent week,
undermining the metal's appeal as a safe haven.
    Demand in the physical market, however, continued to hold
prices near $1,400 an ounce as the recent drops in the spot
market lured buyers to invest in bullion.
    Spot gold fell 0.25 percent to $1,390.81 an ounce by
0643 GMT, after gaining more than half a percent on Monday. It
rose 2 percent last week - its strongest weekly percentage gain
in a month - but is down 17 percent for the year. 
    "The paper market is dropping but we are seeing a different
story in the physical market," said Zane Lim, regional manager
of operations at Singapore-based dealer BullionStar. "Everybody
is buying and no one is selling."
    Bullion is being sold at high premiums compared to spot
prices as there is not enough supply in the market to meet the
strong demand.    
    "We are not seeing any signs of slowing down. People are
still thinking it is a good price to go in at," Lim said, adding
that most of the bullion dealers in Singapore were sold out.
    Gold prices remain near a two-year low of $1,321.35 hit in
mid-April as investors flock to higher-yielding stocks. Last
week, gold gained as investors sought its safe-haven status
after the dollar and equity markets were hit by factory data
from China and the United States that showed the pace of
manufacturing had slowed. 
    Holdings in SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, are at their lowest since
mid-February 2009, falling 0.24 percent to 1,016.16 tonnes on
Friday. The fund held 1,350.50 tonnes of gold at the beginning
of 2013. 
    Demand in India, the world's biggest gold market, was
subdued as the peak wedding season cools off, and its central
bank is taking more steps to curb gold purchases. 
    U.S. gold rose 0.22 percent to $1,389.70. Silver
 and palladium tracked gold lower, while platinum
gained.
     
  Precious metals prices 0643 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1390.81   -3.47   -0.25    -16.94
  Spot Silver        22.51   -0.12   -0.53    -25.66
  Spot Platinum    1449.25    1.75   +0.12     -5.59
  Spot Palladium    731.79   -4.21   -0.57      5.75
  COMEX GOLD JUN3  1389.70    3.10   +0.22    -17.07        50637
  COMEX SILVER JUL3  0.22    0.00   -0.12    -99.26         9777
  Euro/Dollar       1.2920
  Dollar/Yen        101.96
 
  COMEX gold and silver contracts show the most active months
 
 (Editing by Tom Hogue and Muralikumar Anantharaman)
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