PRECIOUS-Gold up nearly 2 pct on ETF inflow, tight physical supply

Mon Aug 12, 2013 3:23pm EDT

* SPDR logs inflow of 1.8 tonnes, 1st since June 10
    * China H1 gold consumption jumps sharply year-over-year
    * Tightness in physical market underpins prices
    * Coming up: US import, export prices, retails sales Tuesday

 (Adds trader comment, details of physical tightness, second
byline, dateline)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Aug 12 (Reuters) - Gold rose nearly 2
percent on Monday, hitting its highest in nearly three weeks as
strong Chinese gold consumption and an inflow to gold-backed
exchange-traded funds fuelled hopes of resurgent physical and
investment buying.
    Silver soared more than 4 percent to a near two-month high
on gold's coattails, while recent strong U.S. and Chinese
economic activities prompted some investors to buy silver as an
industrial play.
    The yellow metal extended its winning streak to a fourth
consecutive session after Chinese trade data showed the
country's gold demand surged year-over-year in the first six
months. 
    "Gold is rallying on indications of some physical demand in
the market," said Bill O'Neill, partner of commodities
investment firm LOGIC Advisors.
    "But the ETF holdings increase has to be sustained to
indicate it is the start of a new trend," O'Neill said. 
    Holdings in the world's largest golf ETF SPDR Gold Trust
 grew by nearly 2 tonnes to 911.13 tonnes on Friday - the
first increase since June 10. The fund has seen more than 435
tonnes in outflows this year, about $19 billion at current
prices. 
    Spot gold rose 1.7 percent to $1,336.24 an ounce,
having earlier traded as much as 2.2 percent higher at
$1,343.06, its highest since July 24. 
    U.S. Comex gold futures for December settled up $22
at $1,334.20 an ounce, with trading volume about 30 percent
below its 30-day average, preliminary Reuters data showed.
    On charts, Monday's rally lifted gold sharply above its
50-day moving average, and analysts said the next key technical
resistance is the 100-day moving average near $1,380 an ounce.
    Gold posted its second weekly gain last week as recent
stronger economic indicators around the world bolstered
bullion's inflation-hedge appeal.
    Silver rose to a near two-month high of $21.45 an
ounce and was last traded up 4.2 percent at $21.39.
    
    PHYSICAL TIGHTNESS
    Physical supply tightness was reflected by narrowing spreads
between delivery months in the U.S. Comex futures market. 
    For a second straight session, the October contract settled
10 cents above that of December, a market condition known as
backwardation where the nearby delivery price of a commodity
rises above the price for future delivery.
    Record Asian physical demand has soaked up gold bars and
coins since bullion's $225 two-day selloff in April,
contributing to some shortages in the near-term market, dealers
said. 
    Unlike other commodities, gold is also a highly liquid
international monetary vehicle and a prolonged backwardation is
rare for the metal, traders said.
    Among platinum group metals, platinum was down 0.4
percent to $1,493.72 an ounce, while palladium dropped
0.6 percent to $735 an ounce.      
 2:36 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1334.20  22.00   1.7  1313.50 1343.70  128,700
 US Silver SEP  21.340  0.933   4.6   20.620  21.445   62,967
 US Plat OCT   1498.70  -1.90  -0.1  1496.50 1511.00    8,226
 US Pall SEP    737.60  -3.40  -0.5   736.50  747.00    3,626
                                                              
 Gold          1336.24  22.24   1.7  1315.21 1343.06         
 Silver         21.390  0.860   4.2   20.610  21.450
 Platinum      1493.72  -5.78  -0.4  1498.50 1507.50
 Palladium      735.00  -4.50  -0.6   739.50  745.50
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        138,633   203,951   188,357     26.97    5.17
 US Silver       76,230    45,590    54,088     28.02    1.16
 US Platinum      8,402     9,434    12,482     20.57   -1.12
 US Palladium     4,674     3,794     5,344                  
                                                              
 
 (Additional reporting by A. Ananthalakshmi in Singapore and Z.
Sun in London; Editing by Dale Hudson, Keiron Henderson and Nick
Zieminski)