PRECIOUS-Gold inches down; physical buyers pick bargains

Thu Dec 6, 2012 12:26pm IST

* Physical buying emerges after prices fall below $1,700/oz
    * Gold ETF holdings hit record high
    * Coming Up: ECB rate decision; 1245 GMT

 (Adds details, comments; updates prices)
    By Rujun Shen
    SINGAPORE, Dec 6 (Reuters) - Gold edged down on Thursday,
holding near a one-month low hit in the previous session,
pressured by a slightly stronger dollar as investors await a
policy meeting of the European Central Bank for fresh clues to
its stance.
    The decline in gold prices has attracted some physical
buyers in Asia, underpinning market sentiment.
    Stalemated negotiations in Washington between Democrats and
Republicans to resolve the "fiscal cliff" are still the focus of
the market. Neither offered any new compromise in public.
 
    The slow progress in the budget talks has provided little
impetus for gold, contrary to what many traders had expected.
Spot gold has fallen for seven of nine sessions.
    But investors continued to flock to gold-backed
exchange-traded funds, holdings of which hit a record high of
76.074 million ounces on Dec. 5, up 1.4 percent
from the end of October. This compares with a drop of 1.6
percent in spot gold prices during the period.
    "ETF holdings keep hitting record highs, despite stagnant
gold prices, which means that funds are still optimistic on
gold's outlook," said Li Ning, an analyst at Shanghai CIFCO
Futures.
    Li expected gold to revisit the $1,800-level in the first
half of 2013, and to ease in the rest of the year, as an
improving global economy may allow central banks to exit their
accommodative monetary policies -- a key propeller of gold's
8-percent gain this year.
    The European Central Bank is widely expected to hold rates
unchanged at a policy meeting later in the day, but may shed
light on future policy moves. 
    The euro eased a touch against the dollar ahead of the ECB
meeting, further away from a seven-week high hit in the previous
session, while the dollar index rose slightly, putting
pressure on dollar-priced commodities, making them pricier for
buyers holding other currencies. 
    Spot gold edged down 0.3 percent to $1,687.74 an
ounce by 0649 GMT, near a one-month low of $1,684.40 hit in the
previous session. 
    U.S. gold lost 0.4 percent to $1,687.10.
    
    PHYSICAL DEMAND IMPROVES
    The recent drop in prices fuelled buying interest from
physical buyers, dealers said.
    "Physical demand has picked up since prices fell," said a
Singapore-based dealer. "It is very easy to sell as prices seem
unable to rebound above $1,700. Customers feel comfortable
buying at this price level."
    The return of physical buying interest could help offset the
impact of liquidation of long positions for profit-taking before
the end of the year, and help support gold prices.
    "Improving physical demand means that we are probably
getting closer to the bottom of gold prices for now," said
Yuichi Ikemizu, branch manager for Standard Bank in Tokyo,
adding that $1,670 would be a near-term support level.
 Precious metals prices 0649 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1687.74   -5.67   -0.33      7.93
  Spot Silver        32.63   -0.21   -0.64     17.84
  Spot Platinum    1572.24   -3.76   -0.24     12.87
  Spot Palladium    680.47   -2.03   -0.30      4.29
  COMEX GOLD DEC2  1687.10   -6.70   -0.40      7.68        18073
  COMEX SILVER MAR3  32.71   -0.25   -0.75     17.18         3624
  Euro/Dollar       1.3054
  Dollar/Yen         82.42
  COMEX gold and silver contracts show the most active months  
 
    

 (Editing by Clarence Fernandez)
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