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PRECIOUS-Gold steady, supported by inflation, rate concerns

Published 05/03/2011, 02:27 AM
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* Gold seen rangebound in short term, U.S. jobs data eyed

* Spot gold to fall to $1,505 - technicals [ID:nL3E7G303L]

* Coming up: U.S. durable goods; 1400 GMT (Adds detail; updates prices)

By Rujun Shen

SINGAPORE, May 3 (Reuters) - Gold prices held steady on Tuesday, as investors weighed the news of Osama bin Laden's death against other factors including low interest rates in the United States and global inflation concerns.

The death of al Qaeda's leader accelerated spot gold's drop to $1,540.39 from a record high of $1,575.79 on Monday, but trade has been mixed ever since.

"Over the last few weeks gold has become overbought," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, expecting the market to remain volatile in the near term.

The price level at $1,500 is seen as a strong support for gold, Fung added.

Spot gold edged up 0.2 percent to $1,547.14 an ounce by 0612 GMT, after trading in a range of about $35 on Monday, its second-biggest one-day range since March 15.

COMEX gold futures fell as much as 2.6 percent earlier in the day, before trimming losses to $1,547.90, down 0.6 percent from the previous close.

The Relative Strength Index on spot silver peaked at about 84 last Friday, a level unseen since last October, suggesting a heavily overbought market. It stood at 74 on Tuesday.

Gold might have lost some safe-haven appeal on news of bin Laden's death, but the bullish trend is intact as fundamentals of the market remain supportive, said traders and analysts.

"The underlying facts supporting gold are still intact, such as the ultra-loose monetary policy of the U.S. Federal Reserve," said Ong Yi Ling, an analyst at Philip Futures.

Concerns on rising global inflation and ongoing unrest in the Middle East and North Africa may also continue to attract investors to bullion.

India's central bank raised rates by sharper-than-expected 50 basis points to fight inflation, just as finance ministers of China, Japan and South Korea expressed concerns over inflation, rising commodity prices and the increasing volatility of capital flows to the region. [ID:nL3E7G30NW] [ID:nP9E7ET003]

Market participants are waiting for the key U.S. non-farm payrolls data due on Friday, to assess the health of the world's largest economy.

"Unless there's significant job increase, the story of easy monetary policy is still going to remain. But if there is any downside surprise, gold could be pushed up further," said Ong of Philip Futures.

COMEX silver dropped nearly 2 percent to $45.18 an ounce, after dipping to a two-week low of $42.20 in the previous session.

The CME Group Inc raised margin requirement on COMEX silver for the third time since last Monday. It increased maintenance margins for speculators by 11.6 percent to $12,000 per contract from $10,750 effective Tuesday, May 3. [ID:nL3E7G22TT]

Spot silver lost 8.5 percent on Monday, its biggest one-day loss since December 2008. It gained nearly 3 percent to $45.15 an ounce.

Holdings in the iShares Silver Trust , the world's largest silver-backed exchange-traded fund, declined to 11,013.75 tonnes, its lowest since April 14. Precious metals prices 0612 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1547.14 2.84 +0.18 9.00 Spot Silver 45.15 1.26 +2.87 46.31 Spot Platinum 1862.50 8.25 +0.44 5.37 Spot Palladium 774.00 4.55 +0.59 -3.19 TOCOM Gold 4072.00 -15.00 -0.37 9.20 22271 TOCOM Platinum 4904.00 41.00 +0.84 4.43 3055 TOCOM Silver 118.70 1.30 +1.11 46.54 1953 TOCOM Palladium 2030.00 -17.00 -0.83 -3.20 197 COMEX GOLD JUN1 1547.90 -9.20 -0.59 8.90 23021 COMEX SILVER JUL1 45.18 -0.90 -1.96 46.02 9873 Euro/Dollar 1.4825 Dollar/Yen 80.93 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months

(Editing by Ed Lane)

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