PRECIOUS-Gold inches up as Fed seen to stay accommodative

Mon Dec 10, 2012 1:39pm IST

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* Investors eye Fed policy meeting on Dec 11-12
    * Speculators cut net length in gold -CFTC
    * Coming Up: euro zone Sentix index, Dec; 0930 GMT

 (Adds comments; updates prices)
    By Rujun Shen
    SINGAPORE, Dec 10 (Reuters) - Gold inched up on Monday as a
drop in the U.S. unemployment rate did little to dampen
expectations that the Federal Reserve will maintain easy
monetary policy when it meets later this week.
    Investors are watching progress in the U.S. fiscal talks and
potential political uproar in Italy, which could jolt the market
where liquidity is starting to thin as traders close books
before the end of the year.  
    The slow improvement in the U.S. job market and prospects
for more cash printing by the Federal Reserve kept sentiment
buoyant in gold, which has risen about 9 percent this year,
mostly on the Fed's stimulus measures. 
    Investors await a U.S. Federal Reserve policy meeting on
Tuesday and Wednesday, after which the central bank is expected
to announce fresh bond purchases of $45 billion a month to
replace Operation Twist, the Fed's program of buying
longer-dated bonds with sale proceeds from shorter date
holdings, due to expire at the end of the year. 
    "Market expectation is that there could be more quantitative
easing towards the end of the month, and this will be supportive
of gold," said Lynette Tan, an analyst at Philip Futures in
Singapore.
    But Tan said gold was likely to remain trapped in a range
between $1,680 and $1,750 an ounce as many investors have moved
to the sidelines watching the progress of talks in Washington to
avert the "fiscal cliff", $600 billion worth of tax hikes and
spending cuts due to kick off next year that is feared would
trigger another recession. 
    Spot gold edged up 0.2 percent to $1,707.80 an ounce
by 0750 GMT, standing above the 100-day moving average at
$1,702.64. U.S. gold was also up 0.2 percent, to $1,709.
    "If the Fed shows reluctance to continue purchases of
mortgage-backed securities on improving economic outlook, gold
will sell off, but I'd say that's maybe a 10 percent chance,"
said a Singapore-based trader.
    Hedge fund and money managers cut their bullish bets on U.S.
gold last week to the lowest level since late August, and also
reduced silver longs, data from the U.S. Commodity Futures
Trading Commission showed.  
    But some investors continued to pile into gold-backed
exchange-traded funds. Holdings of gold ETFs hit a record high
of 76.129 million ounces on Dec. 7, despite stagnant gold prices
in recent weeks.  
    Weaker-than-expected exports growth in China offset the
optimism on the recovery of the world's second-large economy
brought a set of upbeat data over the weekend, signalling slow
recovery.  
    But improving vehicle market in China is likely to provide
some help for platinum group metals, used in producing
exhaust-reducing autocatalysts. 
    Spot platinum hit a more than one-week high of
$1,612.50, and spot palladium was little changed at
$692.60, close to a near three-month high of $698.50 hit in the
previous session.
    
      Precious metals prices 0750 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1707.80    3.76   +0.22      9.21
  Spot Silver        33.23    0.24   +0.73     20.01
  Spot Platinum    1606.70   11.70   +0.73     15.34
  Spot Palladium    692.60   -0.40   -0.06      6.15
  COMEX GOLD DEC2  1709.00    3.50   +0.21      9.08        16032
  COMEX SILVER MAR3  33.31    0.17   +0.53     19.31         4049
  Euro/Dollar       1.2894
  Dollar/Yen         82.35
  COMEX gold and silver contracts show the most active months
 


 (Editing by Miral Fahmy)
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