* Asian shares at 2-1/2 mth low, dlr index at 6-wk trough
* Gold's short-covering gains not sustainable - trader
* Coming up: U.S. weekly jobless claims, retail sales
By A. Ananthalakshmi
SINGAPORE, Dec 12 Gold inched up on Thursday as
some safe-haven bids emerged after equities and the dollar
dropped on fears over an early end to the Federal Reserve's
Although gold will also hurt from a stimulus tapering,
prices are finding strong technical support at the
$1,250-an-ounce level, which the metal had reached earlier this
week on strong short-covering.
Spot gold was up 0.3 percent at $1,254.86 an ounce by
0736 GMT, not too far from a three-week high of $1,267.26.
Many believe the recent gains - about 2 percent so far this
week - will not be sustainable, especially with a Fed policy
"The short-covering gains will not hold as we haven't seen
any follow-through buying by funds based on fundamentals," said
a precious metals trader in Hong Kong.
"With the tapering coming up, it is not wise to build up
your metals position."
Strong economic data this year has prompted Fed officials to
believe that they could begin tapering the central bank's $85
billion in monthly bond purchases. However, the exact timing has
not been decided.
The Fed holds its final policy meeting of the year next week
and markets believe the agreement on the U.S. budget reached
earlier this week could make it comfortable enough to start
cutting back stimulus immediately.
Asian shares slipped to a 2-1/2 month low on Thursday, while
the U.S. dollar was dangling near a six-week low against a
basket of major currencies on those fears.
Outflows from gold-backed funds continued with SPDR Gold
Trust, the world's largest gold ETF, losing 2.10 tonnes on
The ETF now holds 833.61 tonnes of bullion - its lowest
since early 2009.
U.S. data on jobless claims and retail sales later in the
day could set the tone for prices heading into the Fed meeting
on Dec. 17-18.
PRICES AT 0736 GMT
Metal Last Change Pct chg YTD pct chg
Spot gold 1254.86 3.51 0.28 -25.06
Spot silver 20.3 0.03 0.15 -32.96
Spot platinum 1385.25 5.5 0.4 -9.76
Spot palladium 732.4 -2.85 -0.39 5.84
Comex gold Dec3 1254.5 -2.7 -0.21 -25.14
Comex silver Dec3 20.32 -0.036 -0.18 -32.96
COMEX gold and silver contracts show the most active months
(Reporting by A. Ananthalakshmi; Editing by Richard Pullin,
Joseph Radford and Sunil Nair)