January 2, 2013 / 11:31 AM / in 5 years

PRECIOUS-Gold up after U.S. budget deal but seen vulnerable

* Gold touches two-week high as equities rally helps
    * Option volume on gold miners ETF heavier than usual
    * India central bank looks at further curbs on gold imports
    * Coming up: US Markit PMI, construction spending Thurs

    By Frank Tang
    NEW YORK, Jan 2 (Reuters) - Gold rose nearly 1 percent on
Wednesday, as economic optimism fuelled sharp gains on Wall
Street after U.S. lawmakers clinched a last-minute deal to avoid
tax hikes that threatened to send the economy back to a
    Silver and platinum group metals also rose sharply after the
Congress passed a bill to avert immediate austerity measures, 
as it raised taxes on wealthy individuals and families and
preserved certain benefits. GOL
    Bullion, however, appears to lack momentum to extend its
rally on the first trading day of 2013, analysts said. Signs of
stalling growth in Europe and a plan by India to curb gold
import could prompt investors to sell.
    "I think the reaction is way overdone, and I wouldn't be
surprised to see a fairly substantial sell-off that could erase
a lot - if not all - of these gains," said Frank McGhee, head
precious metals trader at Integrated Brokerage Services.
    Spot gold was up 0.8 percent at $1,687.60 an ounce by
2:54 p.m. EST (1954 GMT), off a two-week high of $1,694.70
reached earlier in the session.
    Gold ended up around 7 percent in 2012 for its 12th straight
year of gains, although it recorded a soft final quarter when it
fell 5.4 percent, its worst quarterly performance since the
third quarter of 2008.
    Silver rose 2.4 percent to $31.01 an ounce. 
    Uncertainty remained after the U.S. deal. Spending cuts of
$109 billion in military and domestic programs were only delayed
for two months, and another fight over the U.S. debt limit looms
at that time as well. 
    U.S. COMEX gold futures for February delivery settled
up $13.00 an ounce to $1,688.80 an ounce, with trading volume at
around 30 percent below its 30-day average, preliminary Reuters
data showed.
    However, options turnover in Market Vectors Gold Miners Fund
, an exchange-traded fund (ETF) for gold producers,
nearly doubled its daily average as investors were buying
options ahead of the sector's next move, said WhatsTrading.com
options strategist Frederic Ruffy. 
    Gold prices could face headwinds from soft physical demand, 
as bullion consumers in India scale back their purchases.
    India's central bank has asked that volume and value
restrictions be placed on gold imports by banks and agencies to
help rein in a current account gap, which touched an all-time
high in the July-September quarter. 
    Also a potential drag on bullion was news that car sales in
France and Spain in 2012 fell to the lowest levels in years.
    Platinum group metals rose, but were well off their session
highs. Platinum was up 1.8 percent to $1,562.74, while
palladium rose 1.9 percent to $704.96 an ounce, well off
$715.72, the highest price since March 2, 2012. 
    Platinum ended 2012 up around 10 percent, mainly driven by
concerns about widespread miner strikes in top producer South
Africa. Platinum is used as an auto catalyst. 
 2:54 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1688.80  13.00   0.8  1670.90 1695.40  108,609
 US Silver MAR  31.007  0.780   2.6   30.225  31.535   33,826
 US Plat JAN   1565.10  26.40   1.7  1536.60 1578.40      450
 US Pall MAR    707.95   4.60   0.7   696.75  718.85    5,209
 Gold          1687.60  13.06   0.8  1670.95 1694.70         
 Silver         31.010  0.730   2.4   30.220  31.490
 Platinum      1562.74  27.74   1.8  1538.50 1575.00
 Palladium      704.96  12.96   1.9   699.52  715.72
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        123,939   165,656   174,396     12.98   -0.12
 US Silver       36,876    54,812    52,585      22.2    1.55
 US Platinum      9,148    12,741     8,902     17.86   -0.55
 US Palladium     5,236     5,410     4,737
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