* China lending requirements in view
* US trade deficit narrows; import prices rise
(Recasts, updates prices, adds detail/comment)
By Melanie Burton and Michael Taylor
LONDON, Dec 10 (Reuters) - Gold fell to session lows on
Friday after China raised bank reserve requirements while U.S.
data showed its trade deficit narrowed much more than expected
as exports rose.
Spot gold <XAU=> was at $1,379.70 an ounce at 1420 GMT, from
$1,387.39 late in New York on Thursday. It earlier hit a session
low at $1,377.10, down from a record high at $1,430.95 touched
on Tuesday.
"It's a mixture of the (U.S.) data but more importantly the
Chinese news that came out," said Afshin Nabavi, head of trading
at MKS Finance in Geneva. "But at the end of the day we are
still holding up to the same range seen earlier this week.
"We are getting close to the year end and there will also be
some liquidation. It looks like some of the longs are taking
advantage of the rallies."
The U.S. trade deficit narrowed much more than expected in
October, a Commerce Department report showed on Friday.
[]
Earlier however, China's central bank 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 at VTB
Capital.
EURO DEBT WOES LINGER
Ireland's debt 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 held 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. []
"It's obviously been another roller-coaster week. There has
been an 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 lower at $1,381.10.
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. []
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 $28.40 an
ounce, against a $28.70 close. In other metals, platinum <XPT=>
was at $1,673.99 against $1,675.99 while palladium <XPD=> was at
$733.22 as against $735.97.
(Editing by James Jukwey)
