July 16, 2013 / 10:06 AM / 6 years ago

PRECIOUS-Gold up as stable CPI eases stimulus tapering fears

* Dollar drop underpins gold's gains
    * Markets eye Bernanke congressional testimony Weds, Thurs
    * Physical gold buying resilient but shows signs of slowing

 (Adds analyst comment, updates prices)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, July 16 (Reuters) - Gold rose on Tuesday as
signs of stabilizing U.S. inflation pressures suggested the
Federal Reserve is on track to start tapering its bond purchases
later this year rather than imminently.
    Bullion investors remain focused on Fed Chairman Ben
Bernanke's semi-annual testimony to U.S. Congressional
committees this Wednesday and Thursday, which will be watched
for further signs about the timing and speed of its $85 billion
monthly mortgage-backed securities buyback.
    The metal extended gains after the U.S. Labor Department
said its Consumer Price Index increased 0.5 percent, the largest
rise since February. 
    "The CPI figure is lower than what the Fed wants, so the
gold market sees this as tapering is further away," said Carlos
Perez-Santalla at brokerage Marex Spectron.
    Spot gold rose 0.7 percent to $1,290.56 an ounce by
2:40 p.m. EDT (1840 GMT).
    U.S. gold futures for August delivery settled up
$6.90 to $1,290.40 an ounce, with volume at about 30 percent
below its 30-day average, preliminary Reuters data showed.
    Gold gained 5 percent last week, its biggest weekly gain in
nearly two years, after Bernanke said the U.S. central bank
needed to keep a stimulative monetary policy in place given an
uncertain job market and low inflation.
    The metal was still down 23 percent this year on heavy fund
liquidation due to a lack of inflation and after Bernanke in
June hinted at withdrawing monetary stimulus.
    Gold's appeal as a safe-haven and inflation hedge has been
tarnished this year by a stronger dollar, rallying stock
markets, and improving bond yields, which all led to rapid
outflows from gold-backed exchange traded funds.
    The top eight gold ETFs monitored by Reuters have seen
holdings drop by about 19 million ounces, or $24 billion at
current prices, so far this year. This represents a 25 percent
drop from a record high reached at the start of 2013. 
    On Tuesday, bullion was supported as the U.S. dollar 
came under pressure after disappointing U.S. retail sales for
June on Monday raised doubts about an imminent reduction in
stimulus by the Fed. 
    Demand from the physical gold market remains strong but has
showed signs of easing, dealers said.
    Gold jewellery demand in top buyer India ebbed and was seen
as unlikely to gain traction until late August, when seasonal
buying during the autumn wedding season and religious festivals
should pick up again. 
    Buying from China, which usually provides support for gold
during Asian trading hours, was also subdued as buyers waited
for clearer price directions, traders said. 
    Premiums for gold bars on the Shanghai Gold Exchange (SGE)
fell to $25 over the London spot price from as high as $36 last
week, capping price rallies. 
    Silver rose 0.1 percent to $19.91 an ounce, while
palladium was up 0.7 percent to $733.25 an ounce.
    Platinum eased 0.1 percent to $1,420.49 an ounce
after data showed the European auto market was very weak in
June. Europe is the main market for diesel engines, which mostly
use platinum-based catalysts to clean up exhaust emissions.
 2:40 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1290.40   6.90   0.5  1275.60 1294.70  116,704
 US Silver SEP  19.935  0.096   0.5   19.660  20.045   24,658
 US Plat OCT   1425.10   3.70   0.3  1413.40 1434.90    6,560
 US Pall SEP    735.60   3.45   0.5   727.00  737.25    2,106
 Gold          1290.56   8.57   0.7  1277.73 1295.34         
 Silver         19.910  0.020   0.1   19.730  20.040
 Platinum      1420.49  -1.51  -0.1  1414.00 1430.00
 Palladium      733.25   4.75   0.7   730.17  735.25
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        142,703   193,507   179,431      22.5   -0.43
 US Silver       27,093    66,385    56,418      30.6    1.18
 US Platinum      6,675    16,183    13,073        27    2.79
 US Palladium     2,139     4,399     5,481                  
 (Additional reporting by A. Ananthalakshmi in Singapore;
editing by James Jukwey, Keiron Henderson, David Evans,
Marguerita Choy and Nick Zieminski)
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