December 9, 2008 / 9:16 AM / 10 years ago

Gold steady after biggest daily gain in 2 wks

SINGAPORE (Reuters) - Gold trimmed early gains on Tuesday as speculators booked profits after bullion posted its biggest daily gain in two weeks the previous day, but firm oil and optimism about U.S. economic plans underpinned sentiment.

Gold bars are seen in a jewellery shop in the northern Indian city of Lucknow in this January 10, 2008 file photo. REUTERS/Pawan Kumar/Files

U.S. President-elect Barack Obama pledged to create more than 2.5 million new jobs by 2011, while Chinese and European leaders plotted their next steps as investors looked to governments to

lead major economies out of recession.

Gold hit an intraday high of $776.45 an ounce before slipping to $773.30 as the euro turned lower against the U.S. dollar. That was still $2 higher than New York’s notional close.

Gold has bounced more than 10 percent since tumbling to a 13-month low of $680.80 in late October, when a sell-off in equities forced investors to dump bullion to cover margin calls.

Bullion was still 25 percent below March’s record of $1,030.80.

“Gold seems to have found temporary solace after witnessing consistent selling last week,” said analyst Pradeep Unni at Richcomm Global Services.

“If oil continues to offer support, then gold might extend its gains beyond $780. However a close above $780 is a necessity for accelarated gains,” said Unni, referring to Monday’s session

high.

Oil barely changed, at around $43 a barrel on Tuesday after a 7 percent jump the previous day, with the market watching for the U.S. Energy Department’s short-term outlook that could point to more oil demand weakness next year.

Dealers also awaited the outcome of the U.S. Federal

Reserve’s Federal Open Market Committee meeting on interest rates on Dec. 15, which could determine the direction of the dollar and precious metals.

“The expectation is the dollar will soften after the rate cut and that will be supportive for gold. But I think gold will trade in a range for the time being,” said a dealer in Hong Kong.

“Physical buying is limited at the moment after prices went up to as high as $780 this week. I think jewellers have already bought enough stocks for the Christmas period,” he said.

Premiums for gold bars were unchanged in Hong Kong at $1.50 to $2.00 to the spot London prices.

The FOMC has already slashed its benchmark lending rate to 1 percent from 5.25 percent since September 2007 in an attempt to stabilise financial markets and stem economic weakness.

Dealers expect at least a half percentage point cut in the Fed’s benchmark lending rate at next week’s policy meeting, to 0.5 percent.

The Nikkei rose 0.8 percent on Tuesday on optimism for U.S. economic plans and a government bailout of the “Big Three” automakers. The euro slipped to $1.2875.

Platinum was trading at $803.50 an ounce, down $17.50 from New York’s notional close on Monday, when it gained more than 5 percent on growing optimism about the auto industry rescue

plan.

The White House reviewed a Democratic plan on Monday to bail out stricken automakers with up to $15 billion in loans, a bid that would also clear the way for longer-term help if industry meets certain conditions.

New York gold futures added $5.8 an ounce to $775.1 in electronic trade.

Precious metals prices at 0648 GMT

Metal Last Change Pct chg YTD pct chg Turnover

Spot Gold 773.30 2.00 +0.26 -7.13

Spot Silver 10.03 0.08 +0.80 -32.09

Spot Platinum 803.50 -17.50 -2.13 -47.14

Spot Palladium 172.00 -1.00 -0.58 -53.26

TOCOM Gold 2299.00 -38.00 -1.63 -24.87 37887

TOCOM Platinum 2408.00 -118.00 -4.67 -54.90 15527

TOCOM Silver 295.80 2.80 +0.96 -45.32 385

TOCOM Palladium 524.00 -4.00 -0.76 -61.21 269

Euro/Dollar 1.2873

Dollar/Yen 92.59

TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.

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