PRECIOUS-Gold steady; heads for 3rd week of gains

* Precious metal steady below 5-week high
* Gold due for deep correction -technicals
* Coming Up: U.S. existing home sales for December; 1500 GMT

(Updates prices, adds quotes from physical market)
By Lewa Pardomuan
SINGAPORE, Jan 20 (Reuters) - Gold regained strength
on Friday after an early drop in prices spurred bargain hunting
from investors in Asia, while a steady euro and rising equities
offered additional support for the metal, which is heading for
its third week of gains.
Consumers in China helped bullion jump to its highest in
more than a month this week, and other consumers made
last-minute purchases before the long Lunar New Year break
starts next week. Gold has gained around 6 percent so far this
year.
Spot gold added 0.07 percent to $1,657.89 an ounce by
0718 GMT after falling to a low around $1,653. It had hit a high
of almost $1,670 an ounce on Thursday, its strongest since
mid-December, before losing some of the gains due to weak U.S.
inflation data.
Bullion struck a record of around $1,920 last September.
"Gold has had a fairly good run so far this year, maybe this
is time to consolidate a little. A pause here would probably be
a healthy sign. After that, I think the next move is likely to
be up towards $1,680," said Nick Trevethan, a senior commodity
strategist at ANZ bank in Singapore.
"I think physical flows may slow a little next week. Chinese
buyers will still take the time to come to the market if prices
fall significantly. So, I think there's going to a floor under
the market, initially at $1,650, but I can't see a big fall
to below $1,600."

U.S. gold for February rose $3.6 an ounce to
$1,658.10 an ounce.
Shares in Asia rose to fresh two-month highs on Friday as
solid euro zone sovereign debt sales and signs that Greece may
be nearing a vital debt-swap deal eased concerns over Europe's
refinancing capability, boosting appetite for riskier assets.

Gold often tracks the fortunes of the euro and stocks
because of its safe-haven status, which allows speculators to
sell the metal for cash to cover losses in other markets,
especially during the period of uncertainty in Europe.
"Gold has gone up so much since the start of the new year,
so there's profit taking. The Chinese guys are on the buying
side. They have pushed up the market but I think at the higher
end, people are cautiously bullish," said a physical dealer in
Hong Kong.
"The funds are still wondering whether there will be a
recession, or whether the crisis in Europe will spread."
Other dealers said physical demand also stirred up trading
in Southeast Asia.
"All customers are buying and selling a couple times in a
session. The Thais are still on and the Indonesians as well.
They are mostly on the buying side since this morning," said a
dealer in Singapore.
"But I think the majority of people think that if the price
does break the high of $1,680, it may correct back."
In the energy market, Brent crude held steady above $111 on
Friday with investors betting oil demand would grow as Europe's
funding worries ease amid supply concerns over Iran's tensions
with the West.

Precious metals prices 0718 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1657.89 1.10 +0.07 6.02
Spot Silver 30.70 0.15 +0.49 10.87
Spot Platinum 1516.50 1.10 +0.07 8.87
Spot Palladium 671.00 -3.47 -0.51 2.84
COMEX GOLD FEB2 1658.40 3.90 +0.24 5.85 11145
COMEX SILVER MAR2 30.71 0.20 +0.66 10.01 1706
Euro/Dollar 1.2961
Dollar/Yen 77.14

COMEX gold and silver contracts show the most active months