PRECIOUS-Gold rises to 4-month high on doubts over U.S. economy

Wed Feb 26, 2014 2:24am EST

* Gold due for deep correction -technicals 
    * Coming up: U.S. new home sales at 1500 GMT


    By Lewa Pardomuan
    SINGAPORE, Feb 26 (Reuters) - Bullion reversed early losses
and rose to its highest in four months on Wednesday as data
raised questions about the strength of the U.S. economy,
burnishing gold's safe-haven appeal.
    Investors have poured back into the metal on worries about
economic conditions in the United States and also China, which
is now dealing with unprecedented growth in corporate debt.
 
    Gold was up 0.22 percent at $1,343.10 an ounce as of
0700 GMT after touching $1,345.35, its highest since late
October. It had earlier hit an intraday low of $1,337.04.
    Despite recent gains, bullion remains well below an all-time
high around $1,920 struck in 2011.
    "I guess a lot of people were expecting U.S. interest rates
to go up and gold to go down, but since the start of the year,
what's happening is just the opposite," said Yuichi Ikemizu,
branch manager for Standard Bank in Tokyo.
    "We broke the 200-day moving average about a week ago, and
that has made investors feel comfortable with gold. I think the
next level is $1,350," said Ikemizu, referring to the next
resistance level.
    U.S. gold was steady at $1,343.20 an ounce.
    U.S. home price gains slowed in December, according to a
closely watched housing survey on Tuesday that underscored a
loss of momentum in the housing recovery, while consumer
confidence drifted lower this month. 
    
    An increase in holdings of bullion-backed exchange-traded
funds highlights renewed investor interest in gold, but physical
buyers in key consumers such as India and China could be waiting
for a price correction.
    "The phone starts ringing again after the price moves up,
but I don't think this is related to physical buying," said a
dealer in Singapore. "We've got selling from Indonesia because
the rupiah is still weak."
    Hong Kong's net gold exports to China fell 5.4 percent to
89.745 tonnes in January from 94.847 tonnes in December,
reflecting a slowdown in demand from record levels in 2013.
 
    "There are people who are covering their short positions,
but I don't see fresh buying on the physical side," said a
physical dealer in Hong Kong.
    "China isn't buying much either, which is partly because of
the weakening premiums," said the dealer, referring to the price
difference between 99.99 percent purity gold on
the Shanghai Gold Exchange and cash gold.
    High Shanghai premiums over spot gold usually encourage
importers to bring bullion into China, which overtook India as
the world's biggest gold consumer in 2013, according to the
World Gold Council.
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings rose 0.26 percent to
803.70 tonnes on Tuesday from 801.61 tonnes on Monday. 
    Asian share markets struggled to scrape together some gains
on Wednesday following a flat finish on Wall Street and as
concerns over opaque policy moves in China kept investors on
edge amid a drought of major economic data. 
    
  Precious metals prices 0700 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1343.10    2.96   +0.22     11.47
  Spot Silver        21.91    0.09   +0.41     12.88
  Spot Platinum    1433.50    0.60   +0.04      4.83
  Spot Palladium    733.00    0.53   +0.07      2.81
  COMEX GOLD APR4  1343.20    0.50   +0.04     11.77        18604
  COMEX SILVER MAR4  21.97    0.01   +0.00     13.42        12676
  Euro/Dollar       1.3743
  Dollar/Yen        102.28
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