* Price drop draws bargain hunters but many await further
* Spot gold seen testing support at $1,661/oz - technicals
* Coming up: U.S. new home sales; 1500 GMT
(Adds comments; updates prices)
By Rujun Shen
SINGAPORE, Jan 25 Gold rebounded from a near
two-week trough on Friday, tracking a stronger euro and helped
by reaffirmation of Bank of Japan's commitment to aggressive
monetary easing, but a brightened global economic outlook could
curb its gains.
The euro rose to its highest since last February against the
dollar, helping support prices of gold and other
dollar-denominated commodities, by making them more affordable
to buyers holding other currencies.
In addition, Bank of Japan's reaffirmation of its commitment
to aggressive monetary easing also underpinned sentiment.
Monetary stimulus has been a key driver of gold's rally in
recent years, as ultra-low interest rates and heightened
inflation concerns send investors to bullion.
But so far this year, signs that the world's top economies
may be gaining traction have sent precious metals with
industrial applications higher, and weighed on
"It now seems that the stronger tone in global equity
markets, coupled with a notable easing in European and US market
tensions, is leading to short-term pressure on gold," said Ed
Meir, an analyst at INTL FCStone, in a research note.
"We think (this) will continue for a little while longer
given that negative chart picture are also contributing to the
sloppier tone," he said.
Spot gold fell to $1,663.11 an ounce, its lowest in
nearly two weeks. By 0801 GMT, it had rebounded and was up 0.2
percent at $1,670.20, but still looked headed for a weekly
decline of 0.8 percent, its sharpest loss in about a month.
U.S. gold was nearly flat at $1,669.80.
Though the 200-day moving average, at just below $1,663,
provided some support for spot gold, technical analysis
suggested that prices could test the lower level of $1,661, and
possibly ease to the Jan. 4 low of $1,625.79 over the next four
Holdings of SPDR Gold Trust, the world's biggest
gold-backed exchange-traded fund, had dropped 19 tonnes so far
this year to 1,331.706 tonnes on Jan. 24.
"What I really don't like is gold ETFs have seen continuous
liquidation," said the Singapore-based trader, adding that some
investors have been switching out of gold ETFs and into silver
or platinum funds.
The price slump has triggered some physical buying interest,
but many buyers were holding the purse strings tight, with hopes
that prices would further decline, traders said.
Supportive of gold prices, Russia's central bank said it
will continue to buy gold as it seeks to diversify its foreign
reserves away from paper assets it views as risky.
Spot platinum inched up 0.3 percent to $1,683, on
course for about a 1 percent weekly gain, extending its winning
streak to a fourth week, its longest in a year.
Precious metals prices 0801 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1670.20 2.84 +0.17 -0.26
Spot Silver 31.69 0.06 +0.19 4.66
Spot Platinum 1683.00 5.01 +0.30 9.64
Spot Palladium 725.00 1.03 +0.14 4.77
COMEX GOLD FEB3 1669.80 -0.10 -0.01 -0.36 20683
COMEX SILVER MAR3 31.71 -0.01 -0.04 4.90 5480
COMEX gold and silver contracts show the most active months
(Editing by Muralikumar Anantharaman)