PRECIOUS-Gold set for second weekly gain on U.S. stimulus hopes

Fri Oct 25, 2013 2:55am EDT

* Gold near 1-month high, adds 2 pct on week
    * U.S. unemployment claims remain elevated
    * Analysts say rise in gold prices could be limited

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Oct 25 (Reuters) - Gold was hovering near a
one-month peak on Friday and looked set to end higher for a
second straight week on hopes that weak U.S. data would deter
the Federal Reserve from starting to scale back its economic
stimulus measures this year.
    The number of Americans filing new claims for unemployment
benefits fell less than expected last week, while U.S.
manufacturing grew at its slowest pace in a year in early
October, data showed on Thursday. 
    Spot gold had eased 0.3 percent to $1,342.21 an ounce
by 0630 GMT but was still not too far from the $1,351.61 hit on
Thursday, the highest since Sept. 20. The metal has gained about
2 percent this week.
    "Weak employment data signals a positive effect for gold as
markets adjust their expectations regarding a tapering (of the
U.S. stimulus)," said Chen Min, a precious metals analyst at
Jinrui Futures in Shenzhen. 
    "However, it is still too early to reach the conclusion that
the U.S. recovery is stagnant," Chen said, adding the flow of
data had been disrupted by a partial government shutdown earlier
this month caused by political wrangling over the budget. 
    Chen and some other analysts believe gold prices do not have
much room to rise as investor sentiment has been dampened by
volatile price movements this year, outflows from
exchange-traded funds and a global economic recovery. 
    After 12 years of gains, gold has fallen nearly 20 percent
this year on fears the Fed would begin cutting back its
easy-money policy by trimming its $85 billion monthly bond
purchases, which have fuelled gold's appeal as a hedge against
inflation. 
    But the metal has rallied 8 percent, or nearly $100 an
ounce, in less than two weeks as weak U.S. economic data and
lingering budget uncertainties in Washington increased gold's
safe-haven appeal.
    "The recent trend in gold and its volatile reaction to the
most recent economic release show the market is still heavily
data-dependent for price direction," HSBC analysts wrote in a
note. 
    "While we are bullish on gold longer term, further gains may
be difficult to achieve in the near term."

    PHYSICAL DEMAND
    The gain in spot prices has done nothing to revive soft
physical demand in most of Asia and elsewhere. 
    Premiums on the Shanghai Gold Exchange fell to multi-month
lows of $2 an ounce on Friday. That compares to highs of $30
seen in April-May.
    However, in India premiums were at a record high of $120 an
ounce as dealers struggled to meet festive demand amid tight
supplies. 
        
  Precious metals prices 0630 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1342.21   -4.33   -0.32    -19.85
  Spot Silver        22.51   -0.15   -0.66    -25.66
  Spot Platinum    1439.99   -5.11   -0.35     -6.19
  Spot Palladium    742.00   -3.00   -0.40      7.23
  COMEX GOLD DEC3  1342.40   -7.90   -0.59    -19.89        14747
  COMEX SILVER DEC3  22.55   -0.27   -1.19    -25.59         5165
  Euro/Dollar       1.3816
  Dollar/Yen         97.04
 
  COMEX gold and silver contracts show the most active months
 
 
 (Reporting by A. Ananthalakshmi; Editing by Joseph Radford and
Alan Raybould)
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