* Gold to test resistance at $1,424 -technicals
* Strong buying seen in Asia, ETF holdings drop
* Coming Up: Euro zone Consumer confidence; 1400 GMT
By Susan Thomas and Lewa Pardomuan
LONDON/SINGAPORE, April 22 Gold rose on Monday,
supported by strong physical buying after its fall last week to
the weakest price in two years, but sentiment was shaky as
bullion holdings in exchange-traded funds were trimmed to the
lowest in three years.
The technical outlook for gold, which has plunged more than
15 percent so far this year, has yet to improve despite the
physical buying in Asia and elsewhere.
Spot gold rose 1.5 percent to $1,424.50 an ounce by
0937 GMT after reaching a session high of $1,427.20, also its
strongest level for one week.
"We've been seeing some fairly good buying from the physical
market," Citi analyst David Wilson said. "In terms of consumers,
we saw some good buying out of India and much higher turnover in
China and Shanghai, which has definitely helped."
However, he sees the gains as short-lived as inflation, a
key driver of gold, eases.
It posted its biggest-ever daily loss in dollar terms last
Monday, shocking investors, who see gold as portfolio protection
against inflation and other market risks. Prices sank to around
$1,321 on April 16, its lowest in more than two years.
U.S. gold futures hit a high of $1,427.3 an ounce, up 2.3
percent from the previous close of $1,395.60. The June delivery
was $1,423, up almost 2 percent.
"The aggressiveness of the fall suggests that we are still
in a consolidation rather in a reversal role. For me, the $1,435
level is likely to provide resistance," said Tim Riddell, head
of ANZ Global Markets Research, Asia.
"We really need to get back into the $1,500s to say that
there's something more substantial taking place. The close above
$1,400 may have taken the negative pressure out of gold in the
near term. A close below that level will heighten the risks of
new lows," Riddell added.
Holdings of the largest gold-backed exchange-traded-fund,
New York's SPDR Gold Trust, dropped 0.88 percent on Friday
from Thursday, while those of the largest silver-backed ETF, New
York's iShares Silver Trust, remained unchanged for the
Outflows from exchange-traded funds could also indicate that
investors were parking their money elsewhere, although last
week's trading data from the Unites States showed that funds had
injected new money into gold futures.
Hedge funds and money managers raised their net longs in
gold futures and options in the week to April 16, a report by
Commodity Futures Trading Commission (CFTC) showed on Friday, as
new money entered the market at lower prices.
"Given the speed and magnitude of the price decline on
Friday and Monday (of last week), which is captured within these
data, it would appear any positions of size that were instigated
were quickly closed, whether it was long liquidation followed by
fresh longs at lower levels or fresh shorts covered
subsequently," Barclays said in a note to clients.
Gold has failed to react to tension in the Korean peninsula.
The assets appeal as a safe haven has been dented by
expectations the U.S. Federal Reserve could end its
bullion-friendly bond buying programme, which could ease
The precious metal had rallied to an 11-month high in
October last year after the Fed announced its third round of
aggressive economic stimulus, raising fears the central bank's
money-printing to buy assets would stoke inflation.
Gold prices have also come under pressure due to a plan by
Cyprus to sell excess gold reserves to raise around 400 million
euros ($523 million), which led to speculation other indebted
euro zone countries could follow suit.
In other markets, Japanese shares powered to nearly 5-year
highs and determined sellers just failed to breach the symbolic
100 yen/dollar level on Monday, even though the Bank of Japan's
bold reflationary plans were endorsed by the Group of 20
gatherings in Washington.
Other precious metals benefited from gold's gains, with
silver up 1 percent to $23.40 an ounce and palladium
0.9 percent firmer at $678. Platinum was up 0.7
percent at $1,431.49 an ounce.