PRECIOUS-Gold rises 1 pct on physical buying, China inflation

Tue Jul 9, 2013 4:18pm EDT

* Gold one and three-month forward rates suggest increased
borrowing
    * China June consumer inflation up more than expected
    * Gold-backed ETF outflow continues
    * Investors await U.S. June FOMC minutes Wednesday

 (New updates throughout, adds comment, adds second byline, NEW
YORK to dateline)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, July 9 (Reuters) - Gold hit a one-week high
on Tuesday, gaining 1 percent on strong physical demand, and as
Chinese inflation data boosted the metal's appeal as a hedge.
    The metal's second consecutive daily gain was sparked by
data showing China's annual consumer inflation accelerated more
than expected in June. 
    Signs of tightness in gold forward market also boosted
investor sentiment.
    News that the 1-month and 3-month Gold Forward Offered Rates
(GOFO), rates at which bullion banks are prepared to lend gold
on a swap against U.S. dollars, fell for the first time in years
underpinned gold prices.
    "Clearly there is some dislocation in the physical market
and maybe because demand has been surprisingly strong that has
caused some temporary shortages," said Societe Generale analyst
Robin Bhar, adding that there has been a lot of gold borrowing
in the last 24 hours .
    Spot gold touched its highest since July 2 at
$1,260.01 an ounce earlier. It traded at $1,245.90 an ounce, up
0.9 percent by 3:34 PM EDT (1934 GMT)
    U.S. Comex gold futures for August delivery settled
up $11 to $1,245.90 an ounce, as trading volume was 15 percent
below its 30-day average, preliminary Reuters data showed.
    Liquidation in bullion-backed exchange traded funds
continued, suggesting gold prices could come under renewed
pressure, analysts said. 
    Holdings in the SPDR Gold Trust, the world's largest
gold ETF, fell to the lowest since February 2009, down 1.6
percent to 946.96 tonnes. 
    Investors are now focusing on the Federal Open Market
Committee (FOMC) minutes - records from the Fed's June meeting -
due for release on Wednesday.
    
    TECHNICAL SUPPORT
    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. 
    The technical buying also forced investors to cover short
positions, which they had increased in the expectation of
further losses.
    Bullion has fallen nearly 10 percent since Federal Reserve
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.
    It came under additional pressure late last week as a strong
U.S. jobs report showed the employment market remains on track
for a recovery.
    Among other precious metals, silver climbed 0.9
percent to $19.21 an ounce. Platinum rose 0.4 percent to
$1,363 an ounce and palladium gained 0.3 percent to
$697.22 an ounce.
 3:34 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1245.90  11.00   0.9  1232.00 1258.70  153,693
 US Silver SEP  19.138  0.100   0.5   18.930  19.485   31,370
 US Plat OCT   1368.60   6.60   0.5  1354.00 1381.10    7,247
 US Pall SEP    697.35   1.95   0.3   692.00  705.00    2,848
                                                              
 Gold          1247.39  11.50   0.9  1234.18 1260.01         
 Silver         19.210  0.170   0.9   19.020  19.500
 Platinum      1363.00   5.00   0.4  1355.00 1377.50
 Palladium      697.22   2.22   0.3   694.75  703.00
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        179,148   206,364   183,141     24.84   -1.69
 US Silver       34,423    67,384    56,313     36.42   -0.92
 US Platinum      7,416    16,723    13,034     28.76    0.85
 US Palladium     2,889     5,249     5,539                  
                                                              
    

 (Additional reporting by A. Ananthalakshmi in Singapore;
editing by James Jukwey and David Evans; Editing by Diane Craft)