PRECIOUS-Gold up on ECB rate cut talk, non-farm payrolls eyed

Fri Dec 7, 2012 2:44am IST

* U.S. open interest at three-month low
    * Gold priced in euros rises but near oversold territory
    * ETF at record, Indian physical bullion demand strong
    * Coming up: U.S. November non-farm payrolls Friday

 (Adds market details, updates prices)
    By Frank Tang
    NEW YORK, Dec 6 (Reuters) - Gold rose on Thursday on
short-covering before a U.S. employment  report and after
comments from the European Central Bank chief boosted
expectations of an interest rate cut.
    Bullion buying took off after ECB President Mario Draghi
said the euro zone economy was likely to shrink next year as it
has in 2012, and downside risks to growth prevailed for the
region battered by a prolonged debt crisis. 
    The metal rebounded from the previous session's one-month
low but gains faced resistance from technical selling around its
100-day moving average near $1,700 an ounce. Sharp losses in
euro and crude futures also limited gold's gains.
    Funds have been liquidating of late as open interest in U.S.
gold futures, a gauge of market activity, fell to a three-month
low.
    "The loss of all of this open interest signals the
institutions are moving to the sidelines until after an
announcement on the 'fiscal cliff'," said George Gero, vice
president of RBC Capital Markets, referring to talks aimed at
resolving a potential U.S. budget crisis at the year-end.
    Spot gold was up 0.3 percent at $1,699.05 an ounce by
3:34 p.m. (2034 GMT).
    U.S. COMEX gold futures for February delivery settled
up $8 an ounce at $1,701.80, with trading volume around 25
percent below its 30-day average, preliminary Reuters data
showed.
    The metal also tracked gains in U.S. equities after data
showed the number of Americans filing new claims for
unemployment benefits last week fell back to the range before
superstorm Sandy. 
    "There is a preference for riskier assets and
interest-bearing assets," said Andrew Cole, fund manager with
Baring Asset Management.
    Despite Thursday's gain, gold's 14-day relative strength
index (RSI) was at 39, near an area below 30 which analysts
consider oversold.
    Gold priced in euros rose over 1 percent, its
biggest daily rise in a month, boosted by the euro's sharp drop
on Draghi's comments and the metal's gains.
    
    PAYROLLS, BUDGET TALKS IN FOCUS
    Gold investors are awaiting direction from U.S. non-farm
payrolls data for November on Friday and next week's Federal
Reserve policy meeting, as well as clearer signals on how the
United States will deal with negotiations aimed at preventing
$600 billion of tax increases and federal spending cuts. 
    The metal has been under pressure due to uncertainty over
the budgetary measures, which could push the world's biggest
economy back into recession.
    Investors' appetite for physical gold and physically backed
investment products remained sharp, with holdings of the largest
gold exchange-traded fund, SPDR Gold Trust, at a record
high. 
    Demand in India, one of the world's biggest buyers of gold,
was also firm as the rupee climbed. 
    Among other precious metals, silver was up 0.4
percent at $32.98 an ounce. Platinum rose 1.1 percent to
$1,593.49 an ounce, while palladium climbed 1.5 percent
to $692.50 an ounce.
 3:34 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1701.80   8.00   0.5  1687.10 1704.80  133,934
 US Silver MAR  33.114  0.157   0.5   32.600  33.330   37,562
 US Plat JAN   1600.70  16.50   1.0  1573.40 1601.90    7,830
 US Pall MAR    697.05   9.60   1.4   683.00  700.80    4,655
                                                               
 Gold          1699.05   5.64   0.3  1686.73 1702.86         
 Silver         32.980  0.140   0.4   32.570  33.230
 Platinum      1593.49  17.49   1.1  1576.50 1598.50
 Palladium      692.50  10.00   1.5   684.50  696.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        138,947   186,372   174,754     13.42    0.34
 US Silver       40,916    59,041    52,743     21.69   -1.12
 US Platinum      8,724     8,402     8,792     16.45    0.12
 US Palladium     4,657     6,061     4,747                  
                                                               
 

 (Additional reporting by Jan Harvey and David Brough in London;
Editing by Dale Hudson and Kenneth Barry)
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