* Gold down, China tightening lending requirements eyed
* Narrowing US trade deficit, strong confidence data weigh
* Strong underlying physical demand supports prices
* Coming up: U.S. November producer prices due Tuesday
(Recasts, updates prices, market activity to settlement; new
byline, changes dateline, previously LONDON)
By Frank Tang
NEW YORK, Dec 10 (Reuters) - Gold fell on Friday after
China raised bank reserve requirements and investors took
profits in bullion U.S. data showing rising consumer confidence
and a shrinking trade gap.
For the week, bullion fell more than 2 percent, its biggest
weekly decline in nearly two months, as rising yields for U.S.
Treasuries prompted some investors to take profits in precious
metals and allocate some funds to government debt.
Suki Cooper, precious metals analyst at Barclays Capital,
said profit-taking pressured gold but economic uncertainty kept
longer-term investment demand stable across precious metals.
"Gold has still found healthy physical demand upon price
dips even after the seasonally strong period for demand, but
perhaps more importantly, we haven't seen a surge in scrap
supply," Cooper said.
HSBC and other bullion banks also said steep declines in
prices triggered more gold buying in emerging markets. They
pointed to high premiums in India and China as evidence of
strong physical demand.
Spot gold <XAU=> slipped 0.1 percent to $1,385.92 an ounce
at 2:10 p.m. EST (1910 GMT), sharply below a record high at
$1,430.95 set on Tuesday. U.S. February gold futures <GCG1>
settled down $7.90 at $1,384.90.
Spot silver <XAG=> dropped 0.2 percent to $28.65 an ounce,
retreating after a rally to $30.68 on Tuesday.
COMEX gold and silver futures volume were both more than 40
percent below their 30-day averages, preliminary Reuters data
showed, as some trading desks and funds already have closed
their books ahead of the year end.
BNP Paribas analyst Anne-Laure Tremblay said year-end book
squaring was also aiding downside pressure in gold. "Investors
who have performed well this year may be looking to protect
their gains rather at this stage," she said.
Earlier, China's central bank said it was raising lenders'
required reserves by 50 basis points, effective Dec. 20, its
sixth official increase this year. []
"Tighter global monetary policy is bad for gold, and this
is tighter monetary policy. But only slightly, and in one part
of the world, so the impact is not huge," said analyst Matthew
Turner at Mitsubishi Corp.
U.S. data showed consumer confidence rose to its highest
level in six months, while the trade deficit contracted much
more than expected. Investors grew less worried about the
economy, cutting safe-haven demand for gold. []
U.S. Treasuries prices fell, capping off a week of selling
spurred by rising growth outlooks and deficit worries. Slumping
prices raised yields, prompting some reallocation from precious
metals to fixed-income assets.
PHYSICAL BUYING SUPPORTS
Physical demand has limited declines in gold prices.
"Tuesday-Thursday was our strongest three-day run of
physical sales to India since late October, when gold was
trading around $1,320," said UBS analyst Edel Tully.
"Physical buying from India and other centers this week was
likely one of the reasons more investor longs didn't liquidate,
as strong physical demand is often a sign that a downtrend is
about to bottom."
Investors are also eyeing a Federal Reserve meeting next
Tuesday, the first after fierce debate on whether the central
bank's further quantitative easing would help the world's
largest economy. []
For silver, the U.S. Mint is relaunching sales of its
five-ounce "America the Beautiful" silver coins on Friday after
a delay this week due to complaints about high prices charged
by dealers. []
In other metals, platinum <XPT=> eased 0.1 percent at
$1,673.99, while palladium <XPD=> slipped 0.5 percent to $732.
Prices at 2:33 p.m. EST (1933 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1384.90 -7.90 -0.6% 26.3%
US silver <SIH1> 28.605 -0.212 0.0% 69.8%
US platinum <PLF1> 1675.30 -3.60 -0.2% 13.9%
US palladium <PAH1> 732.70 -8.90 -1.2% 79.2%
Gold <XAU=> 1385.65 -1.74 -0.1% 26.4%
Silver <XAG=> 28.64 -0.06 -0.2% 70.1%
Platinum <XPT=> 1673.49 -2.50 -0.1% 14.2%
Palladium <XPD=> 732.00 -3.97 -0.5% 80.5%
Gold Fix <XAUFIX=> 1375.25 -14.75 -1.1% 24.6%
Silver Fix <XAGFIX=> 28.79 38.00 1.3% 69.5%
Platinum Fix <XPTFIX=> 1673.00 8.00 0.5% 14.1%
Palladium Fix <XPDFIX=> 737.00 5.00 0.7% 83.3%
(Additional reporting by Melanie Burton and Michael Taylor in
London)
