* Gold bounces from lows on physical buying
* Technical point downward to $1,295.50 []
* Coming Up: U.S. ISM N-Mfg PMI Sep; 1400 GMT
(Recasts, updates prices)
By Lewa Pardomuan
SINGAPORE, Oct 5 (Reuters) - Gold pared losses on Tuesday
after a price drop ignited buying from jewellers in India and
elsewhere in Asia, but a firmer U.S. dollar could cap further
gains.
A slight decline in ETF holdings might also weigh on gold,
which struck a lifetime high last week. Silver eased after
rising to another 30-year high the previous day, but it has
gained in popularity as a cheaper alternative to bullion for
investment.
Gold <XAU=> hit a low of $1,311.75 an ounce before bouncing
to $1,317.50 by 0623 GMT, up $2.30 from New York's notional
close on Monday, but off a lifetime high around $1,320 hit last
Friday. "I think there's a little bit of physical buying,"
said Ronald Leung, director of Lee Cheong Gold Dealers in Hong
Kong. "The jewellery sector has to buy because of the seasonal
thing," Leung added, referring to the festive season in main
consumer India.
Gold has gained as much as 20 percent this year, partly
driven by expectations the Federal Reserve would take fresh
steps to aid the economy, but a firmer dollar and renewed
concerns about euro-zone debt prompted some investors to sell.
Dealers in Singapore said demand from India persisted,
although the quantity was small, while purchases from Thailand
helped stir up the physical sector and kept premiums for gold
bars steady at 50 to 80 cents to the spot London prices.
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For a Q+A on gold's trend, click []
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U.S. gold futures for December delivery <GCZ0> rose $1.8 an
ounce to $1,318.6 after settling $1 lower on Monday as news
from Ireland, Portugal and Greece put pressure on the euro.
The dollar <USD=> is enjoying a bit of respite against
other currencies on Tuesday, with the dollar index steady at
78.470 <.DXY> after edging off Friday's eight-month low at
78.029. []
A stronger U.S. currency tends to weigh on
dollar-denominated commodities, making them more expensive for
holders of other currencies.
"I think gold may still be underpinned by some financial
worries in the euro zone countries. But I think recently, or at
least for this month, gold is actually taking its cue from the
dollar," said a dealer in Singapore.
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD.P>, said its holdings fell to 1,301.913 tonnes
by Oct 4 from 1,302.345 tonnes on Oct 1. []
The world's largest silver-backed exchange-traded fund, the
iShares Silver Trust <SLV>, said its holdings fell to 9,782.88
tonnes by Oct 4 from a record of 9,786.47 tonnes on Sept 29.
"While the physical market is in surplus, investment demand
has the upper hand, rebounding along with the rally in the gold
price," BNP Paribas said in a report.
"Looking ahead, we expect the silver price to remain high,
averaging $18.50 an ounce in 2010 and $19.70 an ounce in 2011.
In the short term, however, the silver price is vulnerable to a
correction should gold prices retreat."
London silver fix price reached $25 in September, 1980,
according to the Silver Institute, a U.S.-based industrial
group. Silver is used in jewellery, photography and
electronics.
Precious metals prices at 0623 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 1317.50 2.30 +0.17 20.24
Spot Silver 21.93 -0.04 -0.18 30.30
Spot Platinum 1670.00 5.15 +0.31 13.84
Spot Palladium 560.00 2.17 +0.39 38.10
TOCOM Gold 3555.00 13.00 +0.37 9.08
36929
TOCOM Platinum 4510.00 -1.00 -0.02 2.94
15855
TOCOM Silver 59.40 -0.20 -0.34 14.89
486
TOCOM Palladium 1516.00 -13.00 -0.85 30.13
369
Euro/Dollar 1.3714
Dollar/Yen 83.73
TOCOM prices in yen per gram. Spot prices in $ per ounce.
(Editing by Clarence Fernandez)
(lewa.pardomuan@thomson reuters.com; +65 6870 3834; Reuters
Messaging: lewa.pardomuan.reuters.com@reuters.net))
