November 5, 2012 / 11:55 AM / 5 years ago

PRECIOUS-Gold rises on short-covering, U.S. election eyed

* Gold rebounds after biggest 1-day drop since June
    * Investors cautious ahead of neck-and-neck U.S. elections
    * Hong Kong's gold shipments to China jump in September

    By Frank Tang
    LONDON, Nov 5 (Reuters) - Gold rose on short-covering on
Monday after its previous session's 2 percent drop, but a
potential rise in the U.S. dollar on lower expectations for the
Federal Reserve's economic stimulus could weigh on the precious
    Trading volume was lighter than usual a day before the U.S.
presidential election which will be closely watched by financial
markets, with incumbent Barack Obama seen as more supportive of
economic stimulus measures, while Republican challenger Mitt
Romney is expected not to favor additional easing.
    Friday's encouraging U.S. nonfarm payroll report has
prompted many institutional investors to sell their positions in
gold as a hedge against economic uncertainty. The metal has now
erased all its gains after the Fed announced in September its
latest bond-buybacks to boost the job market.
    "Most hedge funds that have underperformed the market will
not endure any short-term declines in anything for fear of
showing negative year end results," said Jeffrey Sica, chief
investment officer of SICA Wealth which manages over $1 billion
in assets.
    Spot gold was up 0.4 percent at $1,683.66 by 3:33
p.m. (2033 GMT), having earlier touched a nine-week low of
    U.S. COMEX gold futures for December delivery settled
up $8 at $1,683.20, with trading volume about 30 percent below
its 250-day average, preliminary Reuters data showed.
    Silver, which tends to be more volatile than gold,
rose 1.2 percent to $31.15 an ounce.
    Some analysts said that a Romney team which champions fiscal
responsibility and is sceptical of Fed stimulus would be
unlikely to renominate Fed Chairman Ben Bernanke for a third
term in 2014.
    In addition to monetary policy, the elections have
implications for how the U.S. will deal with its so-called
fiscal cliff, when about $600 billion in government spending
cuts and higher taxes are set to kick in from Jan. 1.
    UBS said in a note that the outcome of a divided Congress
and disagreement surrounding the fiscal cliff would be gold
    Physical bullion demand appears to have improved following
recent price pullbacks. Hong Kong's gold shipments to mainland
China jumped 23 percent on the year in September to 69.711
tonnes as demand picked up ahead of the holiday season. Net
exports decreased 13 percent on the year. 
    As China does not publish gold trade data, the numbers from
Hong Kong - a main conduit for gold into China - help gauge
China's gold trade. China is gearing up to overtake India as the
world's top gold consumer this year.
    Among platinum group metals, platinum edged up 65
cents to $1,537.75 and palladium fell 0.7 percent to

 3:33 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1683.20   8.00   0.5  1672.50 1686.20  109,736
 US Silver DEC  31.128  0.271   0.9   30.655  31.250   32,503
 US Plat JAN   1542.70  -2.20  -0.1  1538.30 1553.40    5,755
 US Pall DEC    603.00   3.35   0.6   596.05  609.90    2,708
 Gold          1683.66   7.30   0.4  1672.24 1685.96         
 Silver         31.150  0.370   1.2   30.690  31.220
 Platinum      1537.75   0.65   0.0  1539.25 1548.25
 Palladium      604.60  -4.40  -0.7   600.00  608.50
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        119,999   149,374   175,863     16.07    0.58
 US Silver       35,984    41,203    55,586     25.56    2.82
 US Platinum      5,839    11,311     9,382     18.56   -2.43
 US Palladium     2,876     3,458     4,807
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