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Message: Gold Higher In Asia; Physical Demand Supports
 
                       By Clementine Wallop 
                       Of DOW JONES NEWSWIRES 
                     

SINGAPORE (Dow Jones)--Gold prices edged higher in Asian trading Monday as strong Indian and Chinese demand outweighed persistent macroeconomic uncertainty in the euro zone.

Spot gold was trading at $1,644.51 a troy ounce at 0525 GMT, up $2.51 from its previous close. The yellow metal traded in a tight range Monday, changing hands no higher than $1,647.22/oz and not less than $1,635.70/oz.

Asian traders said the market is taking support from robust physical demand, especially in India, where buying activity has picked up ahead of this week's Dhanteras and Diwali festivals.

"Demand for physical gold is very strong these days," a trader in Shanghai said, although she cautioned that continuing nervousness in the euro zone will likely keep prices below $1,700/oz in the next couple of sessions before European policymakers' announce their plan to shore up the region's struggling economy Wednesday.

A trader in Singapore attributed gold's failure to break back through $1,700/oz since the start of October to long-position holders liquidating in anticipation of further near-term volatility.

"I've heard that there are some longs trying to get out of the market because of all this uncertainty," he said, noting that gold has been trading in tandem with risky assets since the beginning of the month rather than reasserting its traditional role as a safe store of value.

Gold last traded above $1,700/oz Sept. 23 and has traded no higher than $1,695.07/oz since the start of October.

While macroeconomic developments in Europe may drive prices in the near term, both traders agreed that physical demand from India and China will keep gold supported above $1,600/oz.

Silver prices rose in line with gold, but analysts said investors remain wary of the grey metal since its 28% correction in September. The Singapore-based trader said a recent increase in short-position holders in the market could also put downward pressure on prices in the near term.

Silver was trading at $31.54/oz, up 14 cents from its previous close.

Platinum and palladium were the strongest performers of the precious metals complex Monday as they benefited from bargain hunting. In recent weeks, Chinese platinum demand has shown signs of picking up, with Swiss customs reporting 139,997 oz of imports into the country during September.

Platinum rose $12.50 to $1,523.50/oz and palladium rose $11.20 to $623.20/oz.

-By Clementine Wallop; Dow Jones Newswires; 65 46154 082; [email protected]

Source: http://online.wsj.com/article/BT-CO-20111024-700898.html

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