PRECIOUS-Gold rises 1 pct on physical demand, drop in equities

Wed May 29, 2013 3:20pm EDT

* Downside possible as data suggests Fed may cut bond buys
    * Premiums on gold kilobars reach record high in Singapore
    * Asian demand to hit quarterly record in Q2 - trade group

 (Updates throughout; adds comment, market details, second
byline, NEW YORK dateline)
    By Frank Tang and Veronica Brown
    NEW YORK/LONDON, May 29 (Reuters) - Gold rose around 1
percent on Wednesday, reversing the previous session's losses as
a dollar drop and declines in equities triggered physical
buying.
    But analysts said the root of weakness in wider markets -
improved U.S. data suggesting the Federal Reserve might taper
its monetary stimulus - was also seen as a catalyst ultimately
to take bullion prices lower.
    Bullion also faced technical pressure as its rally faded
near its 14-day moving average for a second straight day, while
persistent outflows from gold-backed exchange-traded funds
(ETFs) were expected to heap more pressure on prices. 
    For now, lower prices of the precious metal are luring
physical buyers across Asia, with premiums for gold bars in
Singapore hitting a record high.
    "Without the pressure of the dollar strength and firmer
equities, gold is rising today on strong Asian physical demand,"
said David Meger, director of metals trading at Vision Financial
Markets. 
    "Pretty much any dips have been met in adequate buying,"
Meger said.    
    Spot gold was up 0.9 percent at $1,391.30 an ounce by
2:24 p.m. EDT (1824 GMT), after falling in the previous session
as equity markets rose on strong U.S. home sales and consumer
confidence data.
    Trading volume was around 25 percent above its 30-day
average, preliminary Reuters data showed, driven by June-August
contract rollover ahead of June's first-notice day on Friday.
    U.S. stocks retreated from record levels on concerns that
the Fed may start to ease up on its stimulus program. 
    
    ASIA BRIGHT SPOT
    Gold dealers in Asia have been facing a tough time bringing
physical supplies to meet demand after the metal's historic
selloff in mid-April sent prices to two-year lows.
    Premiums for gold kilogram bars in Singapore hit a record
high at $7 an ounce over spot London prices, while premiums in
Hong Kong ranged between $4 and $5 an ounce. 
    Gold futures in Shanghai are about $25 more than
spot gold, indicating strong demand in China, the world's No. 2
consumer after India.
    In contrast, holdings at SPDR Gold Trust, the world's
largest gold-backed ETF, fell to 1,012.25 tonnes on Tuesday,
their lowest since February 2009. 
    The World Gold Council, an industry group, said on Wednesday
Asian gold demand from this April to June will reach a quarterly
record as bullion consumers in the region take possession of
supply freed up by selling from ETFs. 
    Among other metals, silver firmed 0.9 percent to 
$22.44 an ounce, platinum fell 0.4 percent to $1,451 an
ounce and palladium slipped 0.9 percent to $748 an ounce.
 2:24 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold JUN   1391.30  12.40   0.9  1379.10 1393.80  142,419
 US Silver JUL  22.453  0.260   1.2   22.130  22.470   24,760
 US Plat JUL   1453.00  -8.80  -0.6  1451.40 1468.00    7,927
 US Pall JUN    747.80  -9.20  -1.2   744.55  756.45    6,774
                                                              
 Gold          1392.61  12.36   0.9  1380.75 1394.04         
 Silver         22.470  0.240   1.1   22.210  22.500
 Platinum      1451.74  -5.76  -0.4  1454.50 1466.00
 Palladium      747.50  -7.50  -1.0   747.77  755.72
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        279,313   228,790   181,137     22.03   -1.56
 US Silver       27,379    69,628    55,403     33.53   -2.58
 US Platinum      8,750    11,476    11,820      23.1   -0.34
 US Palladium    15,030     6,537     5,217                  
                                                              
    

 (Additional reporting by Clara Denina in London; Editing by
Dale Hudson and James Jukwey)