PRECIOUS-Gold rises the most in seven sessions, China data helps

Tue Jul 9, 2013 3:50am EDT

* Gold extends rebound into second day
    * Inflation, bargain-hunting stoke buying in China
    * China June consumer inflation up more than expected

 (Adds comment, updates prices)
    By A. Ananthalakshmi
    SINGAPORE, July 9 (Reuters) - Gold rose the most in seven
sessions on Tuesday, after breaking through a key technical
level and as China inflation data boosted its appeal as a hedge
against rising prices in the world's second-biggest buyer of the
metal.
    Bullion, down nearly 30 percent for the year, came under
renewed pressure late last week as a strong U.S. jobs report
raised fears of an early end to the U.S. Federal Reserve's bond
buying which has been seen as stoking inflation. 
    But it has now extended gains into a second day, as the
dollar eased from three-year highs and on some bargain-hunting.
Data on Tuesday that showed China's annual consumer inflation
accelerated more than expected in June also helped.
 
    "The increase in Chinese inflation rates could see further
appreciation around gold demand in China, which already appears
to be persisting at elevated levels versus 2012," Nomura
analysts wrote in a note.
    "Rising inflation should hamper significant easing responses
which should see this trend for enhanced Chinese gold demand
continue."
    Spot gold had risen 1.5 percent to $1,254.91 an ounce
by 0728 GMT, after climbing to $1,260.01 earlier. Comex gold
 rose nearly $20 to $1,253.40.
    Traders also attributed some of Tuesday's gains to technical
buying once prices crossed $1,245 -- the level at which gold
stood before nonfarm payroll data came out last Friday.
    Bullion has fallen nearly 10 percent since Fed Chairman Ben
Bernanke said last month the economy was recovering strongly
enough for the U.S. central bank's $85 billion monthly
bond-buying stimulus to be reduced as soon as later this year.
    Gold for immediate delivery fell to $1,180.71 on June 28 to
its lowest since August 2010.
    Despite the rebound, gold continues to be undermined by
liquidation in metal-backed exchange traded funds. SPDR Gold
Trust, the world's largest gold ETF, said its holdings
fell 1.56 percent to 946.96 tonnes on Monday - the lowest since
February 2009. 
    "The unwound gold positions increase gold supply and put
gold under downward pressure, which in turn triggers more
liquidations. We expect the spiral of liquidation to extend to
2014," said Helen Lau, senior metals and mining analyst at UOB
Kay Hian Research.
    Lau expects gold prices to decline by 20 percent
year-on-year to $1,332 in 2013, and another 10 percent in 2014.
    
  Precious metals prices 0728 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1254.91   19.02   +1.54    -25.06
  Spot Silver        19.33    0.29   +1.52    -36.16
  Spot Platinum    1366.99    8.99   +0.66    -10.95
  Spot Palladium    703.00    8.00   +1.15      1.59
  COMEX GOLD AUG3  1253.40   18.50   +1.50    -25.21        42167
  COMEX SILVER SEP3  19.33    0.29   +1.51    -36.23         8763
  Euro/Dollar       1.2885
  Dollar/Yen        101.12
 
  COMEX gold and silver contracts show the most active months
 
 (Editing by Muralikumar Anantharaman and Joseph Radford)
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