December 15, 2011 / 3:35 AM / 9 years ago

PRECIOUS-Gold steady after heavy losses on Europe woes

* Italy bond yields rise to new high; Spain bond sales eyed
    * Spot platinum falls to two-year trough
    * Coming up: Spain bond auctions

 (Updates prices)	
    By Rujun Shen	
    SINGAPORE, Dec 15 (Reuters) - Spot gold was steady on
Thursday, after falling 3.5 percent in the previous session, but
prices continued to hover near a 2-1/2-month low as investors
remained nervous about the euro zone debt crisis amid the
year-end rush to liquidate positions.	
    Asian shares retreated and the euro and commodities nursed
stinging losses as fears grew that the euro zone debt crisis was
spinning out of control after Italy's borrowing costs hit a new
high in the euro era.  	
    The pessimism on the euro zone, as well as the liquidation
of positions by funds, plunged spot gold to its lowest level 
since late September on Wednesday, its third session of losses.	
    Precious metals with industrial applications, such as silver
and platinum, also fell sharply as the economic outlook dims.	
    "It's not only because of the stronger dollar, the year-end
fund redemption and margin call demand from other markets also
contributed to the sell-off," said a Shanghai-based trader.	
    "We might see further weakness in prices as the sentiment
around Europe remains rather bearish."	
    Spot gold edged up 0.1 percent to $1,576.20 an ounce
by 0811 GMT, after posting its biggest one-day decline in nearly
three months on Wednesday.	
    The Relative Strength Index on spot gold dived to below 28
in the previous session, its lowest in more than three years,
indicating an oversold market.	
    U.S. gold fell 0.5 percent to $1,579.	
    Technical analysis suggested that spot gold could fall
further after breaking below the 200-day moving average, a major
support line, but the demise of the bull trend is not a foregone
    Investors will be watching Spain's debt sales later in the
day, as well as inflation and manufacturing purchasing managers
index for the euro zone, to gauge the reach of the debt crisis.
    "We're in for a long sideways volatile market," said Jeremy
Friesen, commodity strategist at Societe Generale in Hong Kong,
"We can go through weeks, if not months, of slow drawn-out
process, because it's ultimately a fiscal problem in Europe that
needs to be resolved."	
    Prices are prone to volatile moves at the end of the year on
thinning liquidity as many have closed their books for the year
and moved to the sidelines of the market, waiting for a fresh
start in January.	
    Despite the steep decline in gold prices, holdings of SPDR
Gold Trust, the world's largest gold-backed
exchange-traded fund, were unchanged at 1,294.796 tonnes by Dec.
14. The holdings edged down 0.6 tonnes, compared to an 8-percent
drop in gold prices. 	
    The slowing of manufacturing in China, the world's
second-largest economy and top consumer of many raw materials,
also piled pressure on industrial metals. 	
    Spot platinum tumbled as much as 3.2 percent to a
two-year low of $1,372, before trimming some losses to trade
    Spot silver dropped to $28.10, its lowest since late
September. The metal has fallen about 10 percent so far this
week, pushing the year-to-date performance into the red.	
    Some expect silver to test a September low of $26, before
prices stabilise and move up again.	
    "If we can build a bottom in the range of $25 to $28, prices
will be able to slowly rise next year," said the Shanghai-based
 Precious metals prices 0811 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1576.20    2.01   +0.13     11.04
  Spot Silver        28.46   -0.41   -1.42     -7.78
  Spot Platinum    1398.00  -18.99   -1.34    -20.91
  Spot Palladium    617.25    3.55   +0.58    -22.80
  TOCOM Gold       3954.00   16.00   +0.41      6.03         1594
  TOCOM Platinum   3529.00   21.00   +0.60    -24.85          473
  TOCOM Silver       70.40   -0.80   -1.12    -13.09           78
  TOCOM Palladium  1557.00    9.00   +0.58    -25.75           46
  COMEX GOLD FEB2  1579.00   -7.90   -0.50     11.09        37882
  COMEX SILVER MAR2  28.47   -0.47   -1.61     -7.98         6057
  Euro/Dollar       1.3008
  Dollar/Yen         77.94
  TOCOM prices in yen per gram. Spot prices in $ per ounce.
  COMEX gold and silver contracts show the most active months
 (Additional reporting by Manolo Serapio Jr.; Editing by Miral
Fahmy and Himani Sarkar)
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