PRECIOUS-Gold inches up as stocks rise, dollar fades

Fri Nov 23, 2012 12:57am IST

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Stocks

   

* Stocks rise, dollar retreats after China, euro zone data

* Focus still on U.S. fiscal cliff; Wall St closed for Thanksgiving

* Indian gold demand beat expectations this year, dealers say

By David Brough

LONDON, Nov 22 (Reuters) - Gold prices edged up on Thursday as well-received Chinese manufacturing data and hopes that a bailout deal for Greece may eventually be agreed boosted stocks and lifted the euro to three-week highs versus the dollar.

Prices held in a tight range, however, with trading activity expected to be light because of the U.S. Thanksgiving holiday, which has closed Wall Street.

Spot gold edged up 0.09 percent to $1,730 an ounce at 1:55 p.m. EST (1855 GMT), while U.S. gold was up 0.08 percent at $1,729.50. Less than 30,000 lots had changed hands on COMEX, about one-fifth as much as usual.

The euro broke higher and world stocks extended a week-long rally as manufacturing surveys in China and the United States boosted confidence in the growth outlook, while euro zone data was not as weak as some had feared.

A report showed China's manufacturing Purchasing Managers Index rose to a 13-month high of 50.4 in November, while euro zone data showed manufacturing activity slowed less than expected in November.

Daniel Briesemann, commodities analyst at Commerzbank in Frankfurt, said gold's appeal as a safe haven investment had prevented it from rising more in line with shares as the dollar weakened against a basket of currencies.

"Gold's safe haven status is putting a brake on gold price risks," he said.

Saxo Bank Vice President Ole Hansen said the better than expected data from China could augur well for demand from the country, which has vied with India as the world's biggest gold consumer this year, but whose gold buying has proved fragile in the face of slowing growth.

"If there is a belief that China has turned the corner, there could be more physical demand," he said.

Gold's 11 percent rise this year has come largely on the back of U.S. monetary easing measures to boost its economy. It has been hovering around $1,730 this week as investors focus on whether the United States will avoid a fiscal crisis.

"The gold market is likely to trade sideways unless you get clear news from the U.S. on the fiscal cliff," said Nic Brown, analyst at Natixis, referring to the $600 billion in tax hikes and spending cuts that are due to roll in early next year, threatening to spur a recession.

"If there is a good resolution on the fiscal cliff, potentially the gold price could go down," he added. "The real movement would be money going back to other risky assets. Our central scenario is for a resolution of the fiscal cliff issue."

Brown said: "What would support gold would be the U.S. drifting in to a fiscal crisis similar to Europe."

U.S. Federal Reserve Chairman Ben Bernanke on Wednesday repeated a warning that failing to avert a move towards the cliff could lead to recession, and said worries over how budget negotiations will be resolved were already damaging growth.

GOLD DEMAND

Investors said resilient Indian and Chinese gold demand underpinned prices.

Ross Norman, chief executive of precious metals trader Sharps Pixley, said Indian physical demand for gold had been better than expected this year, despite an increased gold import duty and a weak monsoon. A poor monsoon can erode farmers' earnings and gold purchases.

"There are some fresh longs coming into the market on the basis of physical demand in gold," he said.

Silver dipped 0.15 percent to $33.28 an ounce after earlier touching its highest level in more than a month. Silver has risen more than 20 percent this year, leading precious metals.

Silver's ratio to gold, which measures the number of silver ounces needed to buy an ounce of gold, held near the six-week low it hit on Wednesday at 51.86 after silver outperformed.

"The ratio should head towards the less steep rising channel support at 50.90/60, or even all the way back to the low of last February at 48.50," Societe Generale said in a note.

Silver usually tracks moves in gold, but can also be influenced by riskier assets due to its industrial nature.

Holdings of the largest silver-backed exchange-traded fund, New York's iShares Silver Trust, dipped 0.15 percent on Tuesday.

ETFs issue securities backed by physical stocks of a precious metal, and have proved a popular way to invest in gold and silver in recent years.

Platinum edged up 0.4 percent to $1,579.60, while palladium was last at $653.60, up 1.9 percent.

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