April 2, 2014 / 4:05 AM / 5 years ago

PRECIOUS-Gold nudges up but still near 7-week low; China demand rises

* Gold edges up after two days of declines
    * SPDR sees outflow of 2.10 tonnes
    * Chinese prices at a premium for first time since early
March

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, April 2 (Reuters) - Gold steadied on Wednesday
after two days of losses but the precious metal remained near
its lowest in seven weeks as strong U.S. factory data boosted
optimism about economic growth, diminishing bullion's safe-haven
appeal.
    Physical demand from top consumer China rose slightly, with
local prices trading at a premium to spot London prices for the
first time since early March.
    Though some in the market believe gold prices could head
lower due to stronger equities, others say emerging physical
demand and geopolitical tensions in Ukraine could support
prices.
    INTL FCStone analyst Ed Meir said a higher stock market
would not necessarily drive money away from gold as the tone of
the equities market remained nervous.
    "In addition, although the Russian-Ukrainian situation is
receding in terms of urgency, it certainly is not over given
that Russian troops are still massed on the Ukrainian border,"
said Meir.
    Gold is seen as an alternative investment to riskier assets
such as equities at times of political and economic uncertainty.
    "Short-term, the gold charts look negative, but we should
note that prices are now approaching over-sold territory. We see
prices trading between $1,250-$1,330 over the course of April,"
said Meir.
    Spot gold edged up 0.4 percent to $1,284.20 an ounce
by 0702 GMT, not far from its seven-week low of $1,277.29.
    Prices fell 0.4 percent in the previous session after data
showed U.S. factory activity accelerated for a second straight
month in March and auto sales surged, the latest signs the
economy was regaining footing after a brutal winter.
 
    Holdings in SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, fell 2.10 tonnes to 810.98
tonnes on Tuesday - the lowest since early March. 
    Among other precious metals, platinum rose nearly 1
percent on worries over supply constraints. Anglo American
Platinum has sent force majeure notices to some of the
suppliers to its South African mines, the world's top platinum
producer said, underscoring the widening economic impact of an
almost 10-week-old strike. 
    
    CHINA DEMAND
    Prices for 99.99 percent purity gold on the
Shanghai Gold Exchange hit a premium of about $1 an ounce to
spot prices before easing to trade on par with London rates. 
    Since early March, Shanghai prices have been at a discount
due to weak demand. Traders said discounts had gone up to $8-$10
an ounce. 
    Prices were at a premium of over $20 an ounce in January
just before the Chinese New Year holiday.
    
    PRICES AT 0702 GMT
 Metal            Last       Change    Pct chg
                                                
 Spot gold           1284.2       5.2       0.41
 Spot silver          19.81      0.11       0.56
 Spot platinum         1424       8.1       0.57
 Spot palladium         775       0.4       0.05
 Comex gold          1284.3       4.3       0.34
 Comex silver         19.85     0.162       0.82
 Euro                1.3806                     
 DXY                 80.034                     
                                                
 COMEX gold and silver contracts show the most
 active months
 
 (Reporting by A. Ananthalakshmi; Editing by Ed Davies and
Anupama Dwivedi)
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