Gold steadies on physical buying

Gold regained strength on Monday after jewelers resurfaced at lower levels, while strong equities lifted platinum group metals despite a lack of buying interest from automakers.

Asian stocks gained while the dollar hit a three-month low against a basket of currencies due to concerns the U.S. economy's recovery was losing momentum following the release of poor economic growth data.

Spot gold added $1.80 to $1,183.30 by 11:22 p.m. EDT after hitting a low of $1,179.20 an ounce. Despite the gain, bullion was still around 6 percent below a lifetime high of $1,264.90 struck in June.

We can say that physical buying at the lower end in the Asian region absorbs selling from the ETF. There's more interest over there at $1,170 or below, said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

Gold has recovered due to some kind of technical buying. But I think the market is still thin. Both investors and jeweler makers have buying at the lower end, he added.

U.S. gold futures for December delivery rose $1.5 to $1,185.4 an ounce after settling 1.1 percent higher. Gold had risen after data showed U.S. economic growth slowed in the second quarter, raising concerns about the recovery in the rest of 2010.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said holdings were unchanged at 1,282.279 metric tons, having dropped more than 18 metric tons in late July. The holdings hit a record at 1,320.436 metric tons on June 29.

Platinum rose to its strongest since late June on fund buying driven by gains in stock markets and industrial metals such as LME copper. Sister metal palladium matched a five-week high hit on Friday.

Platinum and palladium are used by the auto industry in catalytic converters to clean tailpipe emissions.

We could see a little bit of demand from the industrial side for palladium last week but things have slowed down because the price is near $500. The industrial side is just checking for prices, said a physical dealer in Tokyo.

It's also the same thing for platinum. We even see some selling from retail investors, he added.

Analysts see platinum prices rising as a gradual economic recovery leads to increased demand for the autocatalyst metal, but some of the euphoria that lifted forecasts earlier this year has evaporated after a hefty correction in May, a Reuters poll showed in late July.

Oil rose toward 12-week highs above $79 on Monday, driven by investor appetite for commodities and energy risk, with macroeconomic indicators in top consumers the United States and China showing slower but sustained growth.

Precious metals prices at 11:22 p.m. EDT

Metal Last Change Pct chg YTD pct chg Turnover

Spot Gold 1183.30 1.80 +0.15 7.99

Spot Silver 18.12 0.16 +0.89 7.66

Spot Platinum 1583.25 16.70 +1.07 7.92

Spot Palladium 495.25 4.25 +0.87 22.13

TOCOM Gold 3304.00 45.00 +1.38 1.38 24238

TOCOM Platinum 4452.00 102.00 +2.34 1.62 11712

TOCOM Silver 51.40 1.80 +3.63 -0.58 289

TOCOM Palladium 1396.00 39.00 +2.87 19.83 220

Euro/Dollar 1.3079

Dollar/Yen 86.52