December 3, 2012 / 4:25 PM / in 5 years

PRECIOUS-Gold up on dollar dip, mixed manufacturing outlook

* China's manufacturing index up, U.S. posts unexpected drop
    * Market digests US Republican proposal to avert fiscal
    * Gold exchange-traded fund holdings hit record
    * Coming up: U.S. ISM New York report Tuesday

 (Adds market details, updates prices)
    By Frank Tang
    NEW YORK, Dec 3 (Reuters) - Gold edged up in quiet trade on
Monday on a dollar drop and a mixed bag of U.S. and Chinese
manufacturing data, while investors remained cautious due to
uncertainty over the outcome of U.S. budget talks.
    A record high in the physical bullion held by the world's
largest gold exchange-traded fund SPDR Gold Trust 
underscored strong investment demand, and better Indian bullion
buying suggested physical buying could underpin prices, analysts
    Bullion ended higher in a narrow trading range after Chinese
PMI manufacturing data showed the key sector grew last month for
the first time in more than a year, while U.S. manufacturing
activity unexpectedly contracted in November to its lowest level
in more than three years. Gold benefited as the dollar fell on
the news. 
    "New contract month and new positions are helping gold. We
have some bargain hunting on an improvement from China's PMI and
after last Wednesday's heavy selling," said George Gero, vice
president at RBC Capital Markets.    
    Spot gold was up 0.1 percent at $1,716.71 an ounce by
3:24 p.m. EST (2024 GMT).
    Newly created longs lifted gold prices, traders said. Last
week, gold dropped sharply after Wednesday's 1.3 percent decline
due to a December-February contract rollover and worries that
the U.S. fiscal crisis might lead to a recession.
    U.S. COMEX gold futures for February delivery settled
up $8.40 at $1,721.10 an ounce. 
    Trading volume was around 50 percent below its 30-day
average, preliminary Reuters data showed. Turnover has dropped
as most investors have completed rolling their contract to
February from December after first-notice day last Friday.
    Bullion investors are digesting a proposal by the U.S. House
of Representatives Republican leaders who called for $2.2
trillion in new deficit-reduction over 10 years in their latest
effort to avert the approaching automatic $600 billion in tax
hikes and spending cuts in early January. 
    Some analysts say lengthy and acrimonious talks could prompt
safe-haven buying of gold. However, others warned long-drawn-out
talks could hurt the precious metal if they spark broad-based
selling of stocks and commodities.
    Also underpinning gold were signs that U.S. central bankers
appeared satisfied with the impact of their latest monetary
    Silver rose 0.7 percent to $33.64 an ounce.
    Underscoring investors' interest in the metal, holdings of
gold-backed exchange-traded funds hit a record
high, and speculators raised their net length in gold for the
third straight week. 
    Platinum group metals, which are mainly used to make auto
catalytic converters to clean exhaust fumes, received a boost
after data showed U.S. auto sales in November was on pace for a
near five-year high and executives are optimistic about 2013.
    Spot platinum edged up 0.1 percent to $1,601.80 an
ounce, and palladium rose 1.4 percent to $686.80 an
 3:24 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1721.10   8.40   0.5  1714.20 1724.90   92,870
 US Silver MAR  33.759  0.480   1.4   33.455  33.930   29,555
 US Plat JAN   1613.80   9.20   0.6  1593.50 1615.40    7,118
 US Pall MAR    691.25   3.05   0.4   680.05  693.80    3,367
 Gold          1716.71   1.82   0.1  1713.35 1721.71         
 Silver         33.640  0.250   0.7   33.440  33.810
 Platinum      1601.80   2.30   0.1  1596.50 1612.00
 Palladium      686.80   9.80   1.4   682.00  689.50
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold         97,176   185,779   174,396     12.98   -0.12
 US Silver       31,776    58,442    52,585      22.2    1.55
 US Platinum      7,970     8,865     8,902     17.86   -0.55
 US Palladium     3,434     6,007     4,737                  

 (Additional reporting by David Brough in London; Editing by
Marguerita Choy and Andrew Hay)
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