* Improved outlook on Greek debt deal, U.S. jobs support
* Report of Fed bond-buying program boosts sentiment
* Better physical demand from China, India lifts prices
* Coming up: U.S. weekly jobless claims Thursday
(Recasts, updates comment, market activity)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, March 7 Gold prices rose
on Wednesday, snapping a three-day losing streak, as
hopes for a new U.S. asset-purchase program and better prospects
facing Greece's debt deal boosted risk appetite.
Gold followed increases in U.S. equities and crude oil after
major banks and pension funds threw their weight behind Greece's
bond swap offer to private creditors, making it increasingly
likely that the rescue package will go through.
Bullion extended gains after the Wall Street Journal said
U.S. Federal Reserve officials were considering a new type of
bond-buying program designed to subdue inflation worries.
Despite the rise, the metal has lost 6 percent
since Wednesday last week, partly due to fears that no monetary
easing was imminent.
"The Fed is going to be so busy managing the yield curve and
it will forget to conduct sound monetary policy and to mop up
this liquidity at some point," said Axel Merk, portfolio manager
of Merk Funds with $700 million in assets under management.
Merk said the possibility of a U.S. asset-purchase program
boosted gold's inflation-hedge appeal. Moves by the Fed to boost
economic growth have eroded its credibility to carry out
mandates as a central bank, he said.
Spot gold was up 0.6 percent at $1,684.76 an ounce by
3:35 p.m. EST (2035 GMT).
U.S. gold futures for April delivery settled up
$11.80 an ounce at $1,683.90, with trading volume sharply lower
than the previous day and about 20 percent below its 30-day
average, preliminary Reuters data showed.
Gold tumbled 2 percent in heavy trade on Tuesday,
breaching key support at its 200-day moving average, on fears of
a chaotic Greek default.
A group of banks and funds representing about 40 percent of
Greece's 206 billion euros ($270 billion) of outstanding debt
on Wednesday said they would take part in the deal,
joining others that have pledged to accept the offer.
"Gold is up because there is growing evidence that there
will not be a hard default in Greece," said Bill O'Neill,
partner at commodities investment firm LOGIC Advisors.
OPEN INTEREST DROP MILD
Despite Tuesday's sell-off, open interest in U.S. gold
futures lost only 0.2 percent, CME data showed, suggesting some
investors could have added new short positions when gold broke
below its 200-DMA.
Bullion, which has recently followed riskier assets instead
of trading as a safe haven, also drew support after data showed
U.S. companies increased their hiring in February.
The price drop elicited a response from the consumer sector,
where buying in China and India has picked up this week, albeit
modestly, and holdings of metal in exchange-traded products
remain at record highs, reflecting investor demand for gold.
"Although the macro environment is still very
gold-supportive, in the nearer term it's going to be the
physical market and whether that enables prices to consolidate
enough so that investment demand can retake the reins," Barclays
Capital analyst Suki Cooper said.
Among other precious metals, silver gained 1.6
percent at $33.43 an ounce. On Tuesday, it dropped more than 4
Platinum group metals also rebounded after the previous
session's sharp losses. Platinum added 1.1 percent at
$1,626.99 an ounce and palladium rose 3.1 percent to $684
Impala Platinum's Rustenburg mine, hit by a large-scale
strike earlier this year, was unaffected by a one-day work
stoppage in the world's No. 1 platinum producer, South Africa.
3:35 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold APR 1683.90 11.80 0.7 1671.70 1688.70 136,812
US Silver MAY 33.585 0.802 2.4 32.755 33.610 42,520
US Plat APR 1627.30 15.40 1.0 1611.00 1635.00 7,347
US Pall JUN 685.35 13.75 2.0 666.05 687.75 2,653
Gold 1684.76 10.82 0.6 1671.65 1687.81
Silver 33.430 0.520 1.6 32.740 33.540
Platinum 1626.99 18.00 1.1 1612.50 1631.00
Palladium 684.00 20.28 3.1 667.70 684.00
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 158,084 201,398 195,207 20.12 -0.01
US Silver 48,963 66,419 74,258 37.53 0.83
US Platinum 8,430 7,958 8,079 23.47 0.09
US Palladium 2,664 5,470 4,683
($1 = 0.7622 euros)
(Additional reporting by Amanda Cooper in London; Editing by
Dale Hudson and Marguerita Choy)