July 24, 2014 / 3:35 AM / 5 years ago

PRECIOUS-Gold falls below $1,300 as equities gain; physical buying picks up

* Asian shares climb on strong Chinese manufacturing data
    * Physical premiums in China increase
    * Coming up: U.S. Weekly Initial jobless claims at 1230 GMT

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, July 24 (Reuters) - Gold broke below the key
psychological level of $1,300 an ounce on Thursday as safe-haven
demand for the metal eased due to rising Asian equities and
strong Chinese manufacturing data.
    Physical demand in the region, however, increased slightly
on the lower prices, with premiums in the biggest bullion
consumer China edging up on buying interest.
    Spot gold fell 0.7 percent to $1,295.00 an ounce by
0615 GMT, after dipping 0.2 percent in the previous session.
U.S. gold slid about $9 to $1,295.50.
    Asian stock markets edged higher on Thursday as China's
factory activity expanded at its fastest pace in 18 months in
July, bolstering hopes for recovery in the world's
second-biggest economy. 
    "The safe-haven demand for gold is muted now as equities are
gaining strength and there has been no significant worsening of
tensions in the Middle East or Ukraine," said one trader in Hong
Kong.
    Another trader said there were also stop-loss orders below
$1,300 which prompted some selling. 
    Gold had recently seen support build around the $1,300 level
on deepening violence in the Middle East and Ukraine that
burnished its safe-haven appeal. The metal is seen as an
alternative investment to riskier assets such as equities during
times of uncertainties.
    Bullion could still see some safe-haven bids as Gaza
fighting raged on Wednesday, displacing thousands more
Palestinians in the battered territory. A Gaza truce involving a
withdrawal of Israeli ground forces from the Palestinian
territory would be unlikely before next week, an Israeli cabinet
minister said on Thursday. 
    Meanwhile, Kiev said two of its fighter jets were shot down
over the rebel-held territory in eastern Ukraine on Wednesday,
and the missiles that brought them down might have been fired
from Russia. 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings rose 0.6 tonnes to
805.44 tonnes on Wednesday - increasing for a second straight
day. 
    
    PHYSICAL MARKETS
    With prices dropping below $1,300, physical buyers - who had
been waiting on the sidelines in recent weeks - came back to the
market, albeit in a small way.
    Prices on the Shanghai Gold Exchange edged up
to a premium of $3-$4 an ounce to the global benchmark from
about $1-$2 on Wednesday. 
    However, despite the increase in buying on Thursday, demand
remains weak compared to earlier this year, dealers said.
    Sluggish physical demand in Asia could weaken support for
any price rally and fail to provide a floor if prices were to
decline.
    China's gold demand slumped by a fifth in the first six
months of 2014, the China Gold Association said in a statement
on Thursday, hurt by a weaker yuan and strong purchases last
year. 
        
    PRICES AT 0615 GMT    
 Metal            Last      Change   Pct chg
                                     
 Spot gold            1295    -8.84     -0.68
 Spot silver         20.75    -0.12     -0.57
 Spot platinum      1469.1     -8.4     -0.57
 Spot palladium     866.85    -1.65     -0.19
 Comex gold         1295.5     -9.2     -0.71
 Comex silver       20.825    -0.17     -0.81
 Euro               1.3444                   
 DXY                80.876                   
                                     
 COMEX gold and silver contracts show the
 most active months
 
    

 (Reporting by A. Ananthalakshmi; Editing by Michael Perry and
Richard Pullin)
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