PRECIOUS-Gold inches up as sluggish data supports Fed’s stimulus

PRECIOUS-Gold inches up as sluggish data supports Fed’s stimulus

SINGAPORE, Feb 22 (Reuters) – Gold inched up on Friday, extending gains from the previous session as lacklustre U.S. data bolstered expectations that the Federal Reserve‘s monetary stimulus would stay in place.

FUNDAMENTALS
* Spot gold inched up 0.1 percent to $1,577.44 an ounce by 0037 GMT, on course for a nearly 2 percent weekly decline, its second week in the red.

* U.S. gold was little changed at $1,577.50.

* A raft of U.S. economic data on Thursday, from claims for jobless aid to factory activity and consumer prices, pointed to a still tepid recovery and supported the argument for the Federal Reserve to maintain its monetary stimulus.

* Two top Federal Reserve officials on Thursday signalled support for scaling back the U.S. central bank’s aggressive bond-buying program, adding fuel to a contentious debate over how long the Fed should continue its extraordinary measures to support the economy.

* Thursday’s Flash Eurozone Services PMI (purchasing managers index) fell below expectations, suggesting the downturn in the region’s businesses worsened and dashinghopes that the region’s economy might soon emerge from recession.

* Switzerland remained a net exporter of platinum and palladium in January, continuing December’s trend, data from the Swiss customs bureau showed on Thursday.

* Holdings of SPDR Gold Trust, the world’s biggest gold-backed exchange-traded fund, dropped 8.89 tonnes to 1,290.306 tonnes on Feb. 21, the lowest in more than five months. The holdings have fallen more than 32 tonnes, or 2 percent, so far this week.

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MARKET NEWS
* U.S. stocks fell for a second straight day on Thursday and the S&P 500 posted its worst two-day loss since November after reports cast doubt over the health of the U.S. and euro-zone economies.

* The dollar inched lower on Friday against a basket of currencies, but remained near a 5-1/2-month top hit in the previous session.

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PRECIOUS-Gold firms, short-term strength possible

* Gold rebounds from seven-month low hit on Thursday

* Euro, stocks, commodities all recover from lows

* Spot gold heads for second week of decline

* SPDR gold ETF set for biggest weekly outflow in 18 months (Updates throughout, changes dateline from SINGAPORE)

By Clara Denina

LONDON, Feb 22 (Reuters) – Gold firmed on Friday, helped by a recovery in assets seen as higher risk, like stocks, the euro and other commodities, after stronger-than-expected German economic data and on concerns that this week’s selling may have been overdone.

European stocks recovered from two-week lows, Brent crude rebounded after falling 2 percent in the previous session, and copper prices bounced from Thursday’s two-month low.

The euro also rose against the dollar, helping push the U.S. unit — strength in which tends to weigh on gold — down 0.2 percent against a basket of currencies.

Spot gold was up 0.4 percent to $1,581.26 an ounce by 1043 GMT, but stayed on course for a weekly decline of 1.5 percent, its second week in the red.

The metal fell to a seven-month low of $1,554.49 an ounce on Thursday after minutes from the Fed’s latest policy meeting triggered worries the central bank might stop or slow its bond buying programme.

“What we are seeing today is just a bit of rebound on the back of the very sharp correction that we saw in the past few days in gold and other commodities,” Danske Bank analyst Christin Tuxen said.

“In the short term, political uncertainty in the euro zone with the Italian elections and the U.S. automatic spending cuts that are due to kick in on March 1, could potentially give gold a little tailwind.”

In the United States, unless Congress reaches a deal, about $85 billion in across-the-board government spending cuts will kick in starting next month in a process called sequestration.

Thursday’s data on employment, manufacturing and consumer prices pointed to a still tepid recovery in the U.S. economy, suggesting the Federal Reserve will have to continue its monetary easing policy.

Easy global monetary policy has helped gold rally in the past few years as investors, worried about currency debasement and inflation as a result of money printing by central banks, sought refuge in the precious metal.

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PRECIOUS-Gold rises, heads for 12th annual gain

PRECIOUS-Gold rises, heads for 12th annual gain

* All eyes on U.S. budget talks, due to resume at 1600 GMT

* Producer selling into higher prices – trade

* India gold demand drops ahead of New Year celebration Continue reading