August 27, 2014 / 5:21 PM / 3 years ago

PRECIOUS-Spot gold edges up on dollar drop, heightened tensions

* Spot gold holds near 200-day moving average

* Bullion posts two-day rise despite economic optimism

* Palladium-backed fund shows hefty outflow; prices up

* Coming up: U.S. GDP data Thursday (Updates market activities)

By Frank Tang and Jan Harvey

NEW YORK/LONDON, Aug 27 (Reuters) - Spot gold edged up on Wednesday as a lower dollar and lingering geopolitical tensions helped offset selling pressure from a record rally in U.S. equities.

The dollar softened as traders focused on riskier assets, while speculation the European Central Bank will resort to monetary stimulus also triggered some interest in bullion, traders said.

On Wednesday, Ukraine accused Russian forces of launching a new military incursion across its border, a day after the leaders of both countries agreed to work toward ending a separatist war in the east of the country.

“The numerous sources of geopolitical crisis are evidently preventing the gold price from slumping,” said Eugen Weinberg, head of commodity research at Commerzbank.

He said gold was currently trading around a key technical support at its 200-day moving average near $1,285 an ounce, but a possible dollar rally and rising U.S. equities could still pressure bullion prices.

Spot gold was up 0.1 percent at $1,282.36 an ounce by 3:33 p.m. EDT (1933 GMT).

U.S. COMEX gold futures for December delivery underperformed spot, settling down $1.80 an ounce at $1,283.40. Trading volume stood at only 72,000 lots, about half of its 30-day average, preliminary Reuters data showed.

The yellow metal posted a second consecutive day of gains. S&P 500 equities index was little changed, hovering just below its record high at above 2,005 reached in the previous session.

Gold was also supported after German consumer sentiment showed its biggest drop in more than three years.

Also underpinning was ECB President Mario Draghi’s call last week for more action on both the monetary and fiscal fronts.

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and a gauge of investor demand, fell 0.4 percent to 797.09 tonnes on Monday from 800.08 tonnes on Friday.

Among other precious metals, silver was up 0.3 percent at $19.40 an ounce, while platinum climbed 0.1 percent to $1,411.60 an ounce, and palladium was up 0.9 percent at $888.97 an ounce.

Exchange-traded funds backed by palladium showed significant outflows. Data on Tuesday from ETF Securities showed holdings of its UK-listed palladium exchange-traded product fell by 120,625 ounces, or 45 percent of its London-vaulted reserves.

Analysts said year-round active palladium buying in a tight physical market helped absorb the sizable volume of the metal brought onto the open market after the ETF outflow.


SETTLE CHNG CHNG VOL US Gold DEC 1283.40 -1.80 -0.1 1280.90 1288.20 62,314 US Silver SEP 19.405 0.019 0.1 19.285 19.475 39,243 US Plat OCT 1419.90 0.30 0.0 1417.20 1425.50 5,558 US Pall SEP 893.90 5.20 0.6 884.50 893.95 5,351 Gold 1282.36 1.72 0.1 1280.40 1287.50 Silver 19.400 0.060 0.3 19.340 19.500 Platinum 1411.60 1.00 0.1 1418.30 1422.50 Palladium 888.97 7.77 0.9 885.90 892.00 TOTAL MARKET VOLUME 30-D ATM VOLATILITY

CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 72,265 143,664 155,471 13.71 -0.11 US Silver 75,388 54,802 58,699 17.06 -0.60 US Platinum 5,762 8,993 12,365 13.17 -0.44 US Palladium 13,652 8,718 5,924 18.27 0.37 (Additional reporting by Lewa Pardomuan in Singapore; editing by Jane Baird, David Evans, Tom Brown and Matthew Lewis)

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