March 4, 2013 / 4:15 AM / 4 years ago

PRECIOUS-Gold prices firm on Asia buying; upbeat U.S. data weighs

* SPDR Gold Trust holdings drop to 7-mth low
    * Shanghai gold premium exceeds $20/oz
    * Spot gold could fall to $1,554.49/oz -technicals
    * Coming Up: Euro zone producer prices; 1000 GMT

 (Updates prices)
    By Rujun Shen
    SINGAPORE, March 4 (Reuters) - Gold inched up on Monday,
bouncing from a one-week low hit on Friday, supported by
physical buying in Asia, but robust U.S. economic data dented
bullion's safe-haven appeal.
    Automatic spending cuts that kicked off in the United States
on Friday, pushing spot gold to its lowest level in more than a
week, also continued to weigh. 
    "The broad theme might be gold-negative, because the
spending cuts are probably taking away a bit of the froth on the
idea that policymakers are spending out of control and they will
keep doing so until the recovery takes hold," said a Hong
Kong-based trader.
    Investors are waiting to see the impact of the spending
cuts, known as the "sequester", although the $85-billion cuts, a
fraction of the U.S. government's total spending of $3.7
trillion, are unlikely to become a huge drag on the economy.
    Vigorous U.S. manufacturing data, together with strong auto
sales and a rise in consumer sentiment in February, suggested a
pickup in economic growth, tempering interest in gold.
 
    Recent weakness in the global market has triggered physical
buying interest in Asia, particularly in China, as the spread
between onshore prices and international prices widens,
cushioning the fall in dollar-priced gold. 
    The popular gold forward contract on the Shanghai Gold
Exchange stood at 320 yuan a gram by 0741 GMT, or
$$1,600 an ounce, a premium of about $23 to spot gold.
    "Most likely we will see banks bringing the metal onshore to
take advantage of the wide spread," said the Hong Kong-based
trader.
    Spot gold inched up 0.1 percent to $1,576.46 an
ounce, recovering from a one-week low of $1,564.44 hit last
Friday.
    U.S. gold was up 0.2 percent at $1,576.
    Technical analysis suggested spot gold could fall to its
Feb. 21 low of $1,554.49, after a brief consolidation, as it is
riding on a downward wave (5), said Reuters market analyst Wang
Tao. 
    
    The exodus of investment from the SPDR Gold Trust, the
world's largest gold-backed exchange-traded fund, continued. Its
holdings fell to a seven-month low of 1,254.885 tonnes on
Friday, in a ninth consecutive session of decline. 
    The overall improving outlook for the global economy has
boosted risk appetite and pulled investors to higher-yielding
assets such as equities.
    "The near-term price of gold is not expected to rise much
above its current level, so long as the recent bout of improved
confidence is sustained and the rally in equity prices is
reflective of fundamentals rather than purchasing by
over-exuberant market participants," National Australia Bank
said in a research note. 
    Hedge funds and money managers increased their net long
positions in gold in the week to Feb. 26 from a more than
four-year low hit a week earlier, showing the return of some
investment interest. 
    In contrast to a sharp decline in speculative interest in
futures and options over the past month, sales of American Eagle
gold coins rose sharply in February on the year, and silver coin
sales posted their strongest performance for the month since
1986. 
    Spot silver rose 0.1 percent to $28.60, pulling back
from a more than six-month low of $27.94 hit in the previous
session.
    
      Precious metals prices 0741 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1576.46    1.60   +0.10     -5.86
  Spot Silver        28.60    0.04   +0.14     -5.55
  Spot Platinum    1573.74    4.00   +0.25      2.52
  Spot Palladium    716.97   -2.50   -0.35      3.61
  COMEX GOLD APR3  1576.00    3.70   +0.24     -5.96        23244
  COMEX SILVER MAY3  28.61    0.12   +0.40     -5.38         5841
  Euro/Dollar       1.2992
  Dollar/Yen         93.42
  COMEX gold and silver contracts show the most active months

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