* Technical trend reversal, short covering support gold
* ETF Securities reports 2 pct rise in gold ETF holdings
* Platinum, palladium rise to multi-week highs
(Recasts, updates prices, market activity to settlement; adds
second byline, dateline, previously LONDON)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 6 (Reuters) - Gold finished higher on
Tuesday, rebounding from a two-week low early in the day on
chart-based support and as investors covered short positions.
"Gold traders followed a reversal of a technical trend.
They had second thoughts late in the day and covered shorts. I
don't think there is any fundamental news that motivated the
rally that we saw late in the day," said FC Stone precious
metals broker George Nickas.
Spot gold <XAU=> was at $863.55 an ounce at 1:57 p.m. EST
(1857 GMT), up 0.5 percent from the last trade of $858.90 on
Monday.
U.S. gold futures for February delivery <GCG9> settled up
$8.20 to $866.00 an ounce on the COMEX division of the New York
Mercantile Exchange.
Bullion dropped to a two-week low of $838.55 in early trade
as the dollar extended its rally against the euro.
VM Group analyst Matthew Turner said gold investors were
looking to currency markets for direction.
"A lot of news on physical demand has been quite poor, and
that might also be weighing on prices," he added.
Then gold rose, even as the dollar climbed further against
the euro after a flash estimate of euro zone inflation came in
weaker than expected, boosting pressure on the European Central
Bank to cut interest rates at its Jan. 15 meeting. []
A firm dollar reduces gold's appeal. But the U.S. currency
trimmed gains after data showed U.S factory orders and pending
home sales dropped more than expected in November.
[]
DEMAND FIRM FROM FUNDS
While the stronger dollar and reports of lackluster jewelry
sales weighed on prices, demand from exchange-traded funds --
which issue securities backed by physical gold -- remained
firm.
ETF Securities, which operates Europe's largest gold-backed
ETF, said holdings of its Physical Gold exchange-traded
commodity <PHAU.L> rose 2 percent in the week to Jan. 2 to
1.899 million ounces. []
Holdings of the world's largest bullion ETF, the SPDR Gold
Trust <GLD>, held at a record 780.23 tonnes on Monday.
"Gold is holding (where it is) because of investment demand
for gold ETFs, rather than demand from the physical side or as
a hedge against the U.S. dollar," said Commerzbank analyst
Eugen Weinberg.
Firmer oil prices, hovering just below $50 a barrel amid
supply fears fueled by Israel's incursion into Gaza and a
dispute between Russia and Ukraine over natural gas, also lent
some support to gold. []
Among other precious metals, platinum and palladium rallied
to multi-week highs, shrugging off poor vehicle sales news from
carmakers, the major consumers of the metals.
Spot palladium <XPD=> was the main riser, climbing 8
percent to a six-week high of $198.50. The metal was quoted at
$197.00 an ounce, 7.4 percent higher than its previous close on
Monday.
Platinum also climbed more than 2 percent to $967.50, its
highest level for three months. It was last at $964.00 an
ounce, 1.9 percent higher from its previous day's finish of
$946.
Spot silver <XAG=> was quoted at $11.42 an ounce, up 1.8
percent from its previous session close of $11.22.
(Reporting by Frank Tang; Editing by David Gregorio)
