PRECIOUS-Gold rebounds from early low as Tokyo bullion rallies
* Gold comes off intraday low, heads for 2nd week of gains
* Gold looks neutral at $1,273-technicals
(Updates prices, adds quotes) SINGAPORE, July 19 (Reuters) - Gold came off an intraday low on Friday and was on track for its second weekly gain, boosted speculative buying ahead of an election in Japan at the weekend. The most active gold futures contract on the Tokyo Commodity Exchange rose to a four-week peak at 4,171 yen ($41.45) a gram. "There are talks the government will increase the tax consumption from next April, so some people are taking positions," said a physical dealer in Tokyo. "We've seen speculative buying related to the coming election." Gold hit a low of $1,281.94 an ounce before rebounding to $1,292.06 by 0316 GMT, up 0.6 percent. Japan's ruling Liberal Democratic Party (LDP) and its New Komeito Party (NKP) coalition partner are expected to win resoundingly in Sunday's upper house election. That could clear the way for Prime Minister Shinzo Abe's to implement comprehensive tax reform, but there is also worry that Abe could lose his focus on the economy after a big win.
Japanese shares fell from a two-month peak on Friday in a sudden reversal sparked by profit-taking ahead of the election.
Gold has fallen more than 20 percent this year on signs the U.S. Federal Reserve is looking to rein in its monetary stimulus. Speculation on the timing of any pull-back in the Fed's bond-buying programme is still capping gains. Chairman Ben Bernanke, speaking before the Senate Banking Committee, reiterated comments he made on Wednesday to the House Financial Services Committee, stressing that the timeline for winding down the U.S. stimulus program was not set in stone.
The Tokyo-led recovery from the intraday low also set off more short-covering from investors who had bet on further weakness in gold prices. "It could not break through $1,270 and there seems to be short covering," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "It looks like there's still a lot of shorts in the market ... But if the outflow on the ETF continues, then of course it will be negative for gold." SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.1 percent to 935.17 tonnes on Thursday, the lowest since early 2009.
U.S. gold futures were at $1,291.10 an ounce, up $6.90. The benchmark June 2014 gold contract on TOCOM stood at 4,167 yen a gram, up 54 yen.
Precious metals prices 0316 GMT
Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1292.06 7.57 +0.59 -22.84 Spot Silver 19.51 0.17 +0.88 -35.57 Spot Platinum 1422.75 10.25 +0.73 -7.31 Spot Palladium 744.75 2.25 +0.30 7.62 COMEX GOLD AUG3 1291.10 6.90 +0.54 -22.96 8927 COMEX SILVER SEP3 0.19 0.00 +0.55 -99.36 2221 Euro/Dollar 1.3137 Dollar/Yen 100.12
COMEX gold and silver contracts show the most active months
($1 = 100.6250 Japanese yen)
(Editing by Tom Hogue)