December 9, 2011 / 3:35 AM / 9 years ago

PRECIOUS-Gold rises on Europe optimism, tracks equities

* Gold tracks S&P on EU optimism, consumer sentiment
    * Bullion sets for weekly drop, market cautious on EU move
    * Coming up: U.S. November federal budget Monday
    By Frank Tang and Amanda Cooper
    NEW YORK/LONDON, Dec 9 (Reuters) - Gold rose on Friday
after the previous day's tumble, swept higher in an equities
rally as EU leaders agreed in principle to form deeper economic
integration and U.S. consumer sentiment rose to its highest
level in six months.
    The precious metal, however, was on track for its third
weekly loss in the past four weeks, hurt by technical selling
earlier this week as investors remained doubtful that the EU
would resolve the crippling debt crisis in the long term.
    Bullion followed the S&P 500 higher after the EU secured an
historic agreement to draft a new treaty to form a closer
fiscal union in the euro zone, but Europe's core economy
Britain refused to join the other 26 countries.
    "The markets are digesting the European news, which has so
far been inconclusive. Gold investors are going to be deferring
making major decisions and take a fresh look after the new
year," said George Nickas, a commodities trader with broker
INTL FCStone.
    Spot gold rose 0.5 percent to $1,716.19 an ounce by
11:37 a.m. EST (1637 GMT.
    U.S. gold futures for February delivery were up
$6.80 at $1,720.30 an ounce, with volume in line to be sharply
below its 30-day norm.Gold, a traditional safe haven which has recently moved in
tandem with riskier assets, could face pressure after data
showed China's industrial output growth hit its slowest pace in
more than two years and its inflation tumbled.
    James Steel, chief commodity analyst at HSBC, said the
metal is also weighed down by gold lending by European banks in
return for U.S. dollars, while demand for gold leases was at
their lowest levels since 1998.
    "Until funding difficulties at European banks are resolved,
it is difficult for us to see any near-term halt in gold
lending. This may help keep gold prices on the defensive,"
Steel said.
    Among platinum group metals, palladium was up 1.7
percent at $682.72, heading for its second week of sharp gains.
Platinum rose 1.3 percent to $1,509.74 an ounce.
Prices at 11:37 a.m. EST (1636 GMT)                           
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
US gold 1720.30     6.80   0.4%   21.0%
US silver 32.305    0.767   2.4%    4.4%
US platinum 1515.60    21.20   1.4%  -14.8%
US palladium 686.30    10.95   1.6%  -14.6%
Gold 1716.19     8.05   0.5%   20.9%
Silver 32.23     0.60   1.9%    4.4%
Platinum 1509.74    18.74   1.3%  -14.6%
Palladium 682.72    11.72   1.7%  -14.6%
Gold Fix 1709.00    -3.00  -0.2%   21.2%
Silver Fix 32.00   -64.00  -2.0%    4.5%
Platinum Fix 1496.00     5.00   0.3%  -13.6%
Palladium Fix 670.00     5.00   0.8%  -15.3%
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