* Focus on China lending requirements
* Coming up: U.S. U.Mich consumer sentiment; Friday 1455 GMT
(Updates, adds comments, pvs SINGAPORE)
By Melanie Burton
LONDON, Dec 10 (Reuters) - Gold was steady on Friday, having
dipped briefly after China raised bank reserve requirements, as
uncertainty over Europe's fiscal health continued to attract
investors to bullion.
Spot gold <XAU=> was up 0.2 percent to $1,390.16 an ounce at
1155 GMT, from $1,387.39 late in New York on Thursday. It was
heading for a 1.6 percent weekly decline, having touched a
record on Tuesday at $1,430.95.
China's central bank on Friday said it was raising lenders'
required reserves by 50 basis points, effective Dec. 20, its
sixth official increase this year. []
The move, following an interest rate rise in October and two
reserve requirement increases in November, is Beijing's latest
step to mop up excess cash in the economy.
"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.
Rising interest rates raise the allure of bank deposits for
investors over gold, while also boosting storage costs for the
metal.
However, concerns over European sovereign debt polished the
metal's appeal as it is seen as a safer investment.
"Prolonged uncertainty over indebted Eurozone countries will
only be gold supportive," said Andrey Kryuchenkov.
Ireland's debt owes continued to grab attention from
investors, as Fitch downgraded the country's rating and the
opposition party said it would vote against a bailout package.
[][]
The euro was steady against the dollar on Friday, staying
soft on concerns over the sovereign debt crisis in the euro zone
while talk of the possibility of more monetary tightening in
China dampened appetite for risk. []
Traders said the market was set for choppy trading as
interest ebbs at year-end.
"It's obviously been another roller-coaster week. There has
been a underlying shift to gold as an alternative currency with
both the dollar and euro weak, and lack of confidence in global
banking and so gold remains in demand," said one London trader.
The trader saw key support at $1,365 with a close or fix
below $1,360 potentially triggering heavy sales.
"But I think a retest of highs is likely," he added.
U.S. gold futures <GCG1> were little changed at $1,391.30.
After gold's pull back this week, physical demand has come
in to underpin prices as investors scout for bargains, which
suggests the metal may be finding its feet.
"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 centres 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. [
Holdings in the SPDR Gold Trust <GLD>, the world's largest
gold-backed exchange-traded fund, had been trending down in the
past week. It declined 1.518 tonnes to 1,293.778 tonnes by Dec.
9 from the previous day. [GOL/SPDR]
In comparison, holdings in the iShares Silver Trust <SLV>,
the world's largest silver-backed exchange-traded fund, stayed
at the record level of 10,941.34 tonnes.
Spot silver <XAG=> pared early gains to steady at $28.79 an
ounce, against a $28.70 close. In other metals, platinum <XPT=>
was at $1,678.24 against $1,675.99 while palladium <XPD=> was at
$740.50 as against $735.97.
(Reporting by Melanie Burton; editing by Anthony Barker)
