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PRECIOUS-Gold holds its ground on weaker dollar and lower shares

Published 09/03/2016, 02:13 am
© Reuters.  PRECIOUS-Gold holds its ground on weaker dollar and lower shares
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* China's February exports slump, weighing on equities

* Goldman Sachs (NYSE:GS) keeps bearish view on gold (Updates prices, adds comment)

By Clara Denina

LONDON, March 8 (Reuters) - Gold hovered just below a 13-month high on Tuesday, supported by a weaker dollar and lower global shares after Chinese trade data fuelled concerns about the state of global demand.

China's February exports slumped 25.4 percent from a year earlier while imports dropped by 13.8 percent. gold XAU= was unchanged at $1,266 an ounce by 1506 GMT, within reach of Friday's peak of $1,279.60, its highest since Feb. 3 last year.

U.S. gold for April delivery GCcv1 gained 0.2 percent to $1,265.30.

"Uncertainty about the global economy and investor risk aversion have been a supporting theme for gold this year," said Carlo Alberto de Casa, ActivTrades' chief analyst.

"The metal is challenging last week's 13-month peak, while February's high around $1,260 has become a strong technical support level."

The dollar was down 0.1 percent against a basket of major currencies, having earlier hit a one-week low versus the Japanese yen, while the pan-European FTSEurofirst 300 index .FTEU3 fell 1 percent.

The next main market focus is Thursday's policy review by the European Central Bank, followed by the U.S. Federal Reserve's policy meeting on March 15-16.

The ECB is expected to ease monetary policy, but investors are uncertain about how far it will go. The Fed lifted interest rates for the first time in nearly a decade in December.

Gold could test $1,300 an ounce, more than 2 percent higher than its current level, if the Fed keeps rates on hold, said Daniel Ang, analyst at Phillip Futures in Singapore.

"A lot of traders are trying to anticipate a 'no rate hike' scenario, causing a bit of an increase in gold," Ang said.

Fed Governor Lael Brainard, who has emerged as a leader of the central bank's dovish faction, argued for patience with regard to interest rate rises. But Fed Vice Chair Stanley Fischer warned that inflation is showing signs of accelerating, words that policymakers often use when signalling a preference for raising rates. bullion, holdings of SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, dropped slightly on Friday but stayed near the highest since September 2014 at 25.5 million ounces. GOL/ETF

"Judging by the buying momentum, especially in ETFs and Chinese physical demand, we could see prices reach $1,300 soon," MKS SA senior vice president Bernard Sin said.

Goldman Sachs, however, is sticking to a near-term target of $1,100 for gold. silver XAG= dropped 1.4 percent to $15.40 an ounce, while spot platinum XPT= was down 0.1 percent at $994.99 after hitting a four-month high in the previous session.

Palladium XPD= was down 1.1 percent at $569.40 after touching $580.56, its strongest since November.

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