Gold holds near $1,640 after euro zone data disappoints

LONDON: Gold held near this week's five-week lows on Thursday as data on European economies signalled a deeper recession than previously thought, weighing down the euro and European shares.

Gold's technical picture remains weak and analysts said there may be further short-term liquidation unless a convincing move higher is seen.

Gold was little changed at $1,641.79 an ounce by 1013 GMT. US gold for April delivery steadied at $1,644.80 an ounce, flat on the day. Spot gold fell to a low of $1,638.83 on Tuesday on technical selling pressure after prices breached a succession of support levels.

Traders see technical support at $1,625, and resistance in the $1,685 area.

"The way gold has been trading recently has tarnished the confidence that we have had for a long time and we now need a bigger spike to create some excitement," Saxo Bank senior manager Ole Hansen said.

"Technically it doesn't look good and that is one of the main obstacles at the moment."

Gold has tended to track stock markets for much of the last year, benefiting from a sharper appetite for assets seen as higher risk, but the relationship is fluid.

On Thursday it was missing the support of the euro, which fell against the dollar, and of European shares after data showed the French and German economies both shrank more than expected in the final quarter of 2012.

 Gold investment has generally softened this year on signs that economies such as the United States and China are picking up, while problems of sovereign debt and economic weakness in Europe are expected to persist.

"One of the key risks to a bullish gold view right now is the pick-up in global economic growth, which takes the shine off defensive assets like gold," broker UBS said in a note.

 FOCUS ON G20

The next focus for the market is a meeting of G20 finance and central bank officials for clues about global growth and also their views on currencies.

"In the short term, we have the G20 and there may be some currency movements on the back of that, which can influence gold's moves," Hansen said.

 The physical market was subdued in Singapore after buying interest from Indonesia and Thailand earlier this week, keeping premiums steady at $1.20 over spot London prices.

Chinese players are on a week-long public holiday for the Lunar New Year celebrations.

The SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings eased to 1325.99 tonnes on Wednesday from 1326.89 tonnes on Tuesday.

Global gold demand fell last year for the first time since 2009, down four percent to 4,405 tonnes, as jewellery buying abated in the key Indian and Chinese markets and US and European coin and bar investment dropped, the World Gold Council said in a report on Thursday.

Among other precious metals, platinum gained 0.6 percent to $1,728.49, still within sight of a 17-month peak struck last week.

Palladium inched up 0.3 percent to $767.75, having risen to its strongest since Sept. 5, 2011 at $775 in the previous session. The most active palladium contract on the Tokyo Commodity Exchange (TOCOM) hit its highest since mid-2001 in Asian trade.

 Silver was up 0.4 percent at $30.85 an ounce. Prices touched a one-month low of $30.56 on Tuesday, before recovering alongside gold.