* Gold up, euro swings into positive territory vs dollar
* Gold boosted as China holds rate despite inflation
* Physical demand rebounds after prices slipped last week
* Coming up: U.S. FOMC policy statement due Tuesday
(Recasts, updates prices, market activity; adds second
byline/dateline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, Dec 13 (Reuters) - Gold rose toward $1,400
an ounce on Monday after a 2 percent decline last week, with
investors buying bullion as the dollar weakened, China kept
interest rates steady and a U.S. tax cut extension loomed.
The dollar fell, partly on concern a tax cut extension
could swell the U.S. budget deficit. This gave gold a boost, as
did signs that inflation is heating up in China, which has so
far refrained from raising interest rates.
"Gold is getting a lift from the lack of action by the
Chinese central government, and you add in prospect of some
type of tax deal getting done, you've got a good underpinning
for gold, said Frank McGhee, head precious metals trader of
Integrated Brokerage Services LLC in Chicago.
Chinese inflation soared past forecasts to a 28-month high
in November and showed signs of spreading beyond food prices.
[] The country has boosted bank reserves, which
investors see as less aggressive than an interest rate hike.
Spot gold <XAU=> rose 0.8 percent to $1,394.81 an ounce at
12:32 p.m. EST (1732 GMT). U.S. gold futures for December
delivery <GCZ0> rose $11.20 an ounce to $1,396.10.
Silver <XAG=> resumed its rally and sharply outperformed
gold. It climbed 3.4 percent to $29.52 an ounce.
COMEX gold and silver futures volume so far were both more
than 50 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.
Gold hit a record high at $1,430.95 an ounce last Tuesday
but quickly surrendered gains to end the week down 2.2
percent.
Speculative buyers have increased net longs, or bullish
positions, by 2.3 percent in the week up to Dec. 7, while
silver's net longs dipped 3.2 percent, CFTC's weekly
Commitments of Traders report showed.
Sharper risk appetite after upbeat Chinese economic data
lifted equity markets and industrial commodities like copper,
which touched a record high, and crude oil. [] []
Investors also had an eye on Federal Reserve policy makers
who meet on Tuesday. The Fed's bond buying program has boosted
gold in recent months as investors worry that loose monetary
policy could eventually result in inflation. []
FOCUS ON YIELDS
U.S. Treasuries prices rose on Monday after an early
sell-off sent yields to their highest level in six months,
attracting buyers back into government debt. []
Last week, slumping U.S. government bond prices raised
yields, prompting some reallocation from precious metals to
fixed-income assets.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic showing correlation between gold and 10-year
Treasury yields: http://link.reuters.com/juh89q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
For now, gold's retreat from record high has unleashed a
fresh wave of consumer demand from jewelers and physical
investors, bullion banks reported.
On the investment side of the gold market, holdings of the
world's largest gold-backed exchange-traded fund, New York's
SPDR Gold Trust <GLD>, declined by a further 3.95 tonnes on
Friday. []
The trust saw outflows of 8.2 tonnes of metal last week, or
0.6 percent of its total gold holdings, its biggest one-week
outflow since early October. It is still the world's
sixth-largest holder of gold, ahead of Switzerland and Japan.
Platinum <XPT=> rose 1.7 percent to $1,692.99 an ounce, and
palladium <XPD=> gained 2.8 percent to $748.97.
Prices at 12:47 p.m. EST (1747 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCG1> 1396.80 11.90 0.9% 27.4%
US silver <SIH1> 29.590 0.985 3.4% 75.7%
US platinum <PLF1> 1697.50 22.20 1.3% 15.4%
US palladium <PAH1> 752.00 19.30 2.6% 83.9%
Gold <XAU=> 1395.69 12.54 0.9% 27.3%
Silver <XAG=> 29.52 0.97 3.4% 75.3%
Platinum <XPT=> 1692.99 27.89 1.7% 15.5%
Palladium <XPD=> 747.10 18.82 2.6% 84.2%
Gold Fix <XAUFIX=> 1399.00 10.75 0.8% 26.7%
Silver Fix <XAGFIX=> 29.33 54.00 1.9% 72.6%
Platinum Fix <XPTFIX=> 1699.00 9.00 0.5% 15.9%
Palladium Fix <XPDFIX=> 761.00 15.00 2.0% 89.3%
(Reporting by Frank Tang; Editing by David Gregorio)
