January 3, 2014 / 4:20 AM / 4 years ago

PRECIOUS-Gold extends gains, climbs to 2-week high as equities soften

* Gold set for best weekly gain since October
    * Chinese premiums and buying ease but still robust
    * SPDR holdings drop 3.60 tonnes

 (Updates prices and China premiums)
    By A. Ananthalakshmi
    Jan 3 (Reuters) - Gold rose for a fourth session on Friday,
gaining over 1 percent to hit a two-week high as weaker equities
spurred demand for the metal as a safe-haven asset.
    Gold, headed for its best weekly performance since October,
was also supported by strong physical demand from China, the
world's biggest bullion consumer. 
    The gains come after gold lost nearly 30 percent in 2013,
ending a 12-year bull run and posting its largest annual loss in
32 years, largely due to the U.S. Federal Reserve's plans to
unwind its monetary stimulus programme.
    Analysts, however, cautioned that the upward momentum in the
early days of the new year will not last and that the metal is
likely to record another drop in value in 2014.
    "The gains might be persistent in January as we come off
2013 losses but it won't continue for the remainder of the year
as the (Fed) tapering is set to begin and the global economy is
improving," said Chen Min, an analyst at Jinrui Futures in
    The Fed's bond-buying stimulus measures amid a weak global
economy helped boost gold prices over the last few years. But
with an improving labour market and other economic progress, the
Fed decided to scale back the stimulus, hurting gold's appeal.
    Spot gold was up 0.85 percent to $1,234.90 an ounce
by 0708 GMT after hitting $1,238.70 earlier - its highest since
Dec. 18. It climbed 1.6 percent on Thursday.
    Silver was also trading near its highest in two weeks
after gaining 3.5 percent in the previous session.
    Asian share markets were under water on Friday, caught up in
an outbreak of global risk aversion. 
    "Positive bullion prices in reaction to the decline in
equities may set the tone for 2014 and reinforce the negative
correlation between the two," HSBC analysts said in a note. 
    Premiums on the Shanghai Gold Exchange showed that Chinese
buying has picked up in recent days as global prices hovered
around $1,200 towards the end of 2013.
    The buying pace dropped slightly after Thursday's rally. 
    Premiums to London prices for 99.99 percent purity gold
 dropped to about $17 an ounce on Friday after
climbing to $25 earlier this week.
    Chinese demand is likely to stay strong in the build up to
the Lunar New Year on Jan. 31, when gold is traditionally given
as a gift, Jinrui's Chen said.
    PRICES AT 0708 GMT
 Metal               Last       Change     Pct chg
 Spot gold              1234.9      10.39        0.85
 Spot silver             20.11       0.11        0.55
 Spot platinum          1405.5          5        0.36
 Spot palladium         728.22       1.97        0.27
 Comex gold Dec3        1234.5        9.3        0.76
 Comex silver Dec3      20.125     -0.003       -0.01
 Euro                    1.365                       
 DXY                    80.576                       
 COMEX gold and silver contracts show the most active

 (Reporting by A. Ananthalakshmi; Editing by Tom Hogue)
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