* Fitch cuts Britain's top-notch credit rating
* Demand for coins, bars soars in Asian markets
* Gold drops over 11 percent in two weeks
* Coming up: Chicago Fed index Monday
(Updates throughout, adds market details)
By Frank Tang and Clara Denina
NEW YORK/LONDON, April 19 Gold rose on physical
buying on Friday, failing to hold onto earlier sharp gains, as
bullion posted heavy losses for a second consecutive week on
investor liquidation driven by months of disappointment over its
The precious metal is down more than 5 percent this week
after notching its biggest-ever daily loss in dollar terms on
Monday. Bullion's collapse caught many veteran investors, who
see gold as portfolio protection against inflation and other
market risks, by surprise.
"With the significant move to the downside, gold is
rebounding off its low on a pick-up in physical demand and
short-covering," said David Meger, director of metals trading at
Vision Financial Markets.
The market was supported later this week as consumers
snapped up bars, coins, nuggets and jewellery as a slump in the
price of the yellow metal released years of pent-up retail
Still, analysts said more weakness could be on the cards,
including further outflows from exchange-traded funds and
possible calls by Federal Reserve policymakers to reduce the
need for further monetary stimulus.
Traders also closely monitor options-related strategies in
the futures market ahead of U.S. gold option expiration next
Gold rose 0.6 percent to $1,398.96 an ounce by 2:52
p.m. EDT (1822 GMT), after trading as high as $1,424.51 in
U.S. gold futures for June delivery settled up $3.10
at $1,395.60, with preliminary Reuters data showed trading
volume set to finish lower than its 30-day average.
Gold was underpinned after Fitch Ratings became the second
major international agency to strip Britain of its top-notch
Still, it posted a two-week loss of over 11 percent, its
largest decline over a two-week period since October 2008.
The market fell by a combined $225 on Friday and Monday, which
compares with a total trading range of $260 in 2012. It is down
about 18 percent so far this year.
The big question is whether gold has entered a lasting bear
market after 12 years of consecutive yearly gains. Gold hit the
lowest price since February 2011 and is now around $500 below
its record high of $1,920.30 set in September 2011.
Dealers around the world said they saw heavy volumes of
physical buying, even though prices had recovered nearly $100
since hitting a two-year trough this week. Buying improved in
top consumer India after a lacklustre start.
However, holdings of the SPDR Gold Trust, the world's
largest gold-backed ETF, are at their lowest in three years
after falling by a further 0.2 percent to 1,133 tonnes on
A plan by Cyprus to sell excess gold reserves to raise
around 400 million euros ($523 million) sparked off gold's rout,
as the news led to speculation that other indebted euro zone
countries could follow suit.
Other precious metals were mixed as gold trimmed its gains,
with silver down 0.3 percent to $23.16 an ounce and
palladium 1 percent higher at $673. Platinum
reversed earlier gains to trade down 0.1 percent at $1,421.49.
2:52 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold JUN 1395.60 3.10 0.2 1385.40 1424.70 179,208
US Silver MAY 22.96 -0.285 -1.2 22.865 23.820 44,413
US Plat JUL 1423.90 -5.10 -0.4 1418.20 1449.90 7,510
US Pall JUN 677.05 7.25 1.1 665.60 681.70 3,189
Gold 1398.96 8.21 0.6 1386.73 1424.51
Silver 23.160 -0.080 -0.3 22.920 23.840
Platinum 1421.49 -1.01 -0.1 1420.50 1448.00
Palladium 673.00 6.50 1.0 667.50 680.00
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 187,328 222,671 178,310 21.71 -2.29
US Silver 53,941 60,047 54,087 34.09 -2.02
US Platinum 7,536 15,962 12,095 21.34 1.81
US Palladium 3,202 5,314 5,317
(Additional reporting by Lewa Pardomuan in Singapore; Editing
by Veronica Brown, Alison Birrane and James Dalgleish)